Sometimes successful investing/trading can be enhanced by simply looking at the calendar. Almost all markets have seasonal patterns, and for stocks, November has been the most bullish month. Does most bullish mean huge moves up in November? Not necessarily, while there are several instances of large November gains, sometimes the gains are small. As measured by the S&P 500 (SPX), most bullish month mean how often the SPX ended November higher than the beginning of the month.
The monthly SPX chart courtesy of Trading View illustrates the statistical evidence.
This chart shows 21 of the prior Novembers. The green up arrows represent Novembers when the SPX ended the month higher than the beginning . The red down arrows indicate SPX lower November closes.
Out of the 21-month sample, there were 16 SPX up closes or 76%, vs. 5 down closes or 24%. Investing/trading involves probabilities not certainties. You make investment/trading decisions based on the highest probability of success. If you are holding long, or buying the SPX at the start of November, there’s a high probability for a profit at the end of November.
Two of the Novembers in the sample are particularly interesting. November 2007 and November 2021 when the SPX ended the month down.
The SPX was up most of 2007 and this was after a multi – year bull move. The SPX November 2007 move down in the most bullish month during a bullish year was a hint that something more bearish could be developing. November 2007 turned out to be the beginning of a brutal 17- month bear market.
The down November in 2021 came after an extended bull run. The SPX was up in December 2021 but that turned out to be the last full month of the extended bull move. The SPX made a significant peak in the second trading day of 2022. This was another example of an SPX down November hinting of a coming bear move.
Also illustrated are the worst November signals. In these situations, the SPX had marginal November moves up or down and subsequently moved counter to the November movements.
November 2010 and 2011 both had marginally lower closes that were followed by multi- month rallies. November 2015 was marginally up followed by a 14% decline into February 2016.
Many Investors/Traders rely almost exclusively on price patterns, while these are important, the time dimension could be of equal or greater importance.
Before making an investment/trading decision – look at the calendar.
Four Dimension Trading 