New Pattern with Dow Jones: Forget Falls - Fear Springs Instead

Dow Jones tanks in September-October, so says the common sense wisdom among the traders. However, since 2001, the pattern seems to have changed. It looks like the descent of the Dow Jones Industrial Average often observed in September-October periods has moved to January-March periods.

Let us take a closer look at the DJIA time series of this decade; the red segments mark January-March intervals, the blue segments mark the September-October intervalls:


Generally, both segments appear quite similar. Let us see what the figures tell us:

We can see that 5 times, the presumably "bad" autumn segment actually performed better than the less feared spring time. In absolute, cumulative terms, the DJIA index did not perform worse in September-October than in January-March. It even gained 24,7 points compared to the January-March segment.

What does it tell us? It shows that the rule "stock markets crash in September" is not necessarily valid.

As predicted, the stock market did not crash in September. I expect that this year, the horrible losses we suffered in the first "spring" segment will have been the worst time of 2009. Even if some market data may indicate that we are still having some troubles in the real economy, the stock market will remain volatile but continue to rise, simply because the fund managers have gazillions of dollars in cash and are eager (or even pressed) to invest it. Since the only investment opportunity that currently promises good short- and mid-term speculative gains is the stock market, they will invest in stocks.

So, even if the market will move sidewards in October, we will probably have well over 10,000 points by Christmas. Enjoy.