Tuesday, November 24, 2009

Why Business Writers Love December

December more than any other month is loaded with seasonality folklore which is recycled annually in the business dailies.

It all begins with the U.S. Thanksgiving trade wherein you buy at the beginning of the week and then sell into strength on the Friday. We then move on to the December “free lunch” and then the Santa Claus Rally which is followed by the January Effect and finally the January Barometer.

The seasonality bible is the Stock Trader’s Almanac. Jeffrey Hirsch is editor-in-chief of the Stock Trader's Almanac and Almanac Investor newsletter. He started with the Hirsch Organization in 1990 as a market analyst and historian under the mentorship of his father Yale Hirsch the founder of the Stock Trader’s Almanac. Drawing on years of market study, Yale created the unique Stock Trader’s Almanac, in 1966. It was first published in 1967. This book allowed Mr. Hirsch to distil his lifelong interest in stock market history, cycles and patterns into a practical working tool for the average investor. It was the first compilation of the market’s seasonal trends and tendencies combined with a calendar and laid out for use by non-institutional investors. It also brought to the general public many “statistically predictable” market phenomena that have since become well known, such as the impact of the four-year Presidential Election Cycle, plus discoveries such as the “January Barometer” and the “Santa Claus Rally.”

Unfortunately only a few seasonal trends are supported by technical analysis – the most important of which is the January Effect – a period beginning mid December through the following January where the smaller companies may outperform the larger companies. A weak January Effect is a bad omen and could be a negative for the next twelve months.

A must read - The Stock Traders Almanac – visit: www.stocktradersalmanac.com

No comments: