Cycles can be very powerful and are found throughout nature. Solar and Lunar eclipses are such cycles and have shown to be a fascination to humankind, capturing the imagination. This past Monday, there was a Total Solar Eclipse of the Sun (Saros # 142) that spanned a good portion of the southern hemisphere, covering Chile and Argentina. In his book, The Tunnel Thru the Air, WD Gann the great market technician and renowned commodity & stock trader encoded a good deal of differing cycles in his storyline that he believed affected the markets (human behavior) in the past and would continue to do so in the future. The novel can be found on the internet for free, and there is a helpful Wikipedia page on WD Gann to explore this more esoteric subject matter within market timing and technical analysis. As part of his toolset, he used eclipses to pinpoint recurring events in stock & commodity markets. On point, the day of the Great American Eclipse of August 21, 2017 (Saros # 145) the S&P 500 index hit a major low and has never challenged that level since. It is a highly technical subject matter that needs significant study before one can incorporate the method into a trading plan.
So, this brings us to the current market and where it stands. In a recent Bear Growls on November 5, we discussed the tendency for the market to bottom just ahead of the presidential election on a 20-year cycle. In a recent webinar hosted by the Foundation for the Study of Cycles, Bill Sarubbi, a veteran trader & portfolio manager pointed out since the year 1885 to the present that the month of December has been up 68.3% of the time, and in years ending in zero 69.2% of the time. It also has the highest percentage return of 1.3%. In the last 20 election years, the month of December was up 16 of those years. Given the frothy valuations and overly bullish sentiment, gains might be muted, since December tends to be the least volatile month on the calendar.
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