Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24
US House Prices Trend Forecast 2024 to 2026 - 11th Oct 24
US Housing Market Analysis - Immigration Drives House Prices Higher - 30th Sep 24
Stock Market October Correction - 30th Sep 24
The Folly of Tariffs and Trade Wars - 30th Sep 24
Gold: 5 principles to help you stay ahead of price turns - 30th Sep 24
The Everything Rally will Spark multi year Bull Market - 30th Sep 24
US FIXED MORTGAGES LIMITING SUPPLY - 23rd Sep 24
US Housing Market Free Equity - 23rd Sep 24
US Rate Cut FOMO In Stock Market Correction Window - 22nd Sep 24
US State Demographics - 22nd Sep 24
Gold and Silver Shine as the Fed Cuts Rates: What’s Next? - 22nd Sep 24
Stock Market Sentiment Speaks:Nothing Can Topple This Market - 22nd Sep 24
US Population Growth Rate - 17th Sep 24
Are Stocks Overheating? - 17th Sep 24
Sentiment Speaks: Silver Is At A Major Turning Point - 17th Sep 24
If The Stock Market Turn Quickly, How Bad Can Things Get? - 17th Sep 24
IMMIGRATION DRIVES HOUSE PRICES HIGHER - 12th Sep 24
Global Debt Bubble - 12th Sep 24
Gold’s Outlook CPI Data - 12th Sep 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Stock Market February Seasonality

Stock-Markets / Sector Analysis Feb 05, 2011 - 12:46 PM GMT

By: John_Hampson

Stock-Markets

Best Financial Markets Analysis ArticleFebruary is an interesting month by seasonality. Typically the start of six months of underperformance for precious metals and the start of six months of outperformance for oil, it is also the second weakest month of the calendar for stocks.

On this occasion I expect Gold to buck seasonal weakness, given that it has been consolidating for the last 3 months during its seasonally strong time and is now signalling a buy:


Source: Investors Intelligence


Source: Chris Puplava

Global oil demand is back at all time high levels, and excess stock levels have been diminishing:


Source: Shortsideoflong / PFS Group

But if anything were to impede crude oil's seasonally strong period, it would be a period of dollar strength, and the dollar may be making a bounce at a key support:


Source: Kimble Charting Solutions

A period of dollar strength could also spell a period of weakness for equities, as the correlation shown here supports:


Source: Fed Reserve and Newarc Investments Inc

So let's go back to February being a seasonally weak month for stocks. The charts below reveal specifically a weak second half to the month:


Source both: Equityclock.com

There is a full moon February 18th 2011 and statistically this implies negative pressure for the stock market leading into and around that date. Returns by moon here:


Source: Dichev/Janes

In summary, a seasonally weak second half of February, weakness into and around a full moon 18th February and a potential sustained dollar bounce from here perhaps give the bears some hope of a genuine pullback from what continues to be a largely overbought status (indicators, sentiment).

Could we even see another flash crash (or worse, a "splash crash" as has been termed to imply a rapid and deep fall in many assets not just stocks) as we have arguably experienced a similar overextension in the stock indices? Well, what caused the flash crash? Geomagnetic activity is the surprising answer.

In the days before the US stock market flash crash of May 6th 2010 there was a buildup in solar activity. Then on May 5th, a pair of solar flares bathed Earth's upper atmosphere in X-rays and caused a double-wave of ionization to sweep over the Americas. There is a correlation between geomagnetic activity and depression and suicide in humans, and an increase in psychotic episodes in individuals who already suffer from unstable psychological states. Geomagnetic activity is also shown to make people more irritable and aggressive, and can affect melatonin synthesis, blood pressure, heart disease and light sensitivity.

It should not surprise you therefore that there is a correlation between stock market returns and geomagnetism, as sentiment and mood play a key role in trading, as shown in this chart of normal days versus days of bad geomagnetism:


Source: Robotti / Krivelyova

Geomagnetic activity and storms display seasonality, as shown here:


Source: Robotti / Krivelyova

The worst returns for stocks occur in September, October, February and March, closely correlating to peaks in geomagnetism. So keep an eye on the space weather, and forecasts for geomagnetic activity.

In summary, the second half of February could provide a pullback in stocks. However, whilst leading indicators remain positive (ECRI last week 3.5% this week 3.7%), US earnings season continues to deliver a beat rate close to 70 (currently around 68%), bull market sustainability index remains positive up to one year out, stocks remain cheap relative to bonds and QE/Pomo continues, I continue to view any significant pullback as a buying opportunity.

John Hampson

www.amalgamator.co.uk

John Hampson, UK / Self-taught full-time trading at the global macro level / Future Studies
www.amalgamator.co.uk / Forecasting By Amalgamation / Site launch 1st Feb 2011

© 2011 Copyright John Hampson - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

SC
06 Feb 11, 08:08
Moon gazing

"There is a full moon February 18th 2011 and statistically this implies negative pressure for the stock market leading into and around that date"

Hmm,it does happen to be options expiry during that week and I thnk that might be a bit more significant than traders howling at the moon ;)


Post Comment

Only logged in users are allowed to post comments. Register/ Log in