Research Excerpts

Mark Twain & The US Stock Market

Posted on: Tuesday, July 10th, 2012

“History doesn’t repeat itself, but it does rhyme.”

Mark Twain

The multi-colored columns in the chart below plot the weekly seasonal trend in the S&P 500 during for the 2nd Quarter since 1957, which is when the S&P 500 changed to its current format from something called the S&P Composite.  The red line plots the actual weekly closing prices in the S&P 500 during Q2 2012.

The chart shows that:

  • the first three weeks of April include three of the four strongest of the entire quarter
  • Week 3 is the strongest week of the quarter
  • the second to last week of May is the seasonally weakest of the quarter,
  • the last week of May is the 2nd seasonally strongest of the entire quarter.

The red line shows that, this year, the US broad market index peaked for the quarter during the last week of April, one week later than the seasonal norm, and subsequently bottomed for the quarter during the second to last week of May, also just one week later than the historical norm.  Even though the market did not follow the Q2 seasonal pattern to the letter this year, a short position in the S&P 500 during the third week on April that was covered during the second to last week of May — as the seasonal pattern suggests  — would have captured a 61 point, 4.4% decline in five weeks.

Our weekly seasonality chart for the 3rd Quarter, which is available in our July Global Seasonal Analysis report and in Monday’s (July 9th)  Keys To This Week report, suggests that this week is an important inflection point for US equities.  Both reports are available in our Research Center, which can be accessed by logging in via the big gold button on the upper right corner of this screen..

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