A replay of 2008 for S&P? Interestingly, the US equity market has been tracking 2008’s trend quite closely since early this year.
Near-term peak in Aug? So far this year, the index has also scaled intermediate bottoms in late Jan, Mar and Jul and peaks in late Jan, May and possibly in Aug. The S&P500 could have already experienced its Aug peak after reaching 1,018pts last Friday. Since then, the index has gone below its near-term support trend line.
Sideways in Aug? Historically, the S&P500 traded sideways in August except during the 1998 Asian crisis and 2001 when global markets corrected sharply. So far, the S&P500 is up 1.8% this month. The average loss during the month of Aug was 1.3% for the 1997-2008 period. Excluding 2008’s 14.6% decline, the average decline in Aug was only 0.05%.
Watch your step in Sep. Seasonally, Sep appears to be a volatile month. During the 1997-2008 period, the gain in the month of Sep was as much as 6.2%. The average decline was only 1.5% but the drop could be as much as 11%. Sep appears to be the month to watch for any potential major correction in equity markets.
Up in Oct? Oct, on the other hand, appears to be a good month for the US market. The average gain in Oct (1997-2008) was 1.1%, which rises to 2.8% if 2008’s 16.9% decline is taken out of the equation.
Rally to continue in Nov? In the past 12 years, Nov was seasonally positive for the market, other than in 2007/2008. The average gain in Nov was 2.2 (1997-2008). Excluding Nov 08, the average gain was 3.1%.
Pause in Dec? For Dec, there were strong 5-6% rallies in 1998, 1999 and 2003. But other than those years, the market was relatively flat in Dec. Probability favours a flat month in Dec.
Pullback in progress? Our preferred wave count remains unchanged. We continue to look for a pullback, which will be followed by one last rally. The S&P500 could have peaked at 1,018pts last Friday and the pullback could have already started. This would be confirmed by a break below 980pts.
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