Robert Taylor's novel "Paradigm" described how ocean tidal cycles interact with market cycles. Since tidal cycles are clearly seasonal and affected by both solar and lunar motion and gravity, it has given me even more confidence in seasonal patterns in markets. Look past the marketing and think about the very real phenomenon: http://www.paradigmbook.com/
If we look at the seasonal pattern for stock market indexes we see a repetitive cycle with several break points fairly closely associated with solar solstices and equinoxes which separate the temperate zone seasons north of 23.5 degrees N and south of 23.5 degrees south of the equator.
The most reliable part of the market cycle is the usual run up from October to January and then down from January to October. There are many traditional ways of describing this cycle, most of them involving inflection points also in March or first half July or September. If the market does not top out in early January it is possible to do so in March or July. If the market does top out in January, it may very well turn up in March or May/June. If we've been around the markets two or three decades we can easily relate to this without ever seeing a seasonal chart of the market. There is much art to such interpretations, but Taylor's work provides both a rationale and a method of "fine tuning".
With Taylor's insights as a background, and perhaps updating W. D. Gann, looking at the S&P 500 futures seasonal is instructive. It's hard to believe but the futures contract, often called the "Spooz", started trading only 25 years ago. Looking at the seasonal pattern from 25 years out and from 15 years out shows that there is some gradual change in emphasis but the basic pattern remains.
(Click on the image for an enlargement.)
The tendency for July/August bear market lows exists in many markets, including gold and stocks over the years and decades. Generally it has been a preliminary low followed by a lower low in October as the top chart shows. But since 1992 the emphasis has changed so that September and October have been retest or higher lows.
If you are an intermediate to longer term trader or investor this perspective can give you an edge or a calendar for trading. You can observe how the current action relates to history. Is it stronger or weaker now? Earlier or later than usual? Or "right on"? My approach would be to expect a decent rally soon. If we are still in a bull market, the rally should be a good one and the low for the year should be in. If the rally is anemic or turns out to be a "no show" then October should be the low for the year end rally.
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