Almanac Investor Alert
November's Vital Statistics Report 10/29/2007
Ah November, Wall Street’s favorite month. As the days shorten the yearend spirit kicks in with visions of dressed turkeys, pumpkin pie and Black Friday. Not Black Monday, the infamous worst single day on The Street, but the Friday after Thanksgiving when retailers expect to go into the black as holiday shopping gets into gear.
November ushers in the best three-month span and the Best Six Months and sports some of the best monthly market gains over all time periods. Since 1950 it ranks number one on the S&P 500 and third on the Dow with 1.8% and 1.7% gains respectively. Since 1971, when NASDAQ started, it garners a number-two ranking and a 2.2% gain for the tech-heavy composite.
Since 1979 when our Russell index data begins, November is the best month for the big caps and second for NASDAQ and the small cap Russell 2000 with average gains of 3.0% and 2.6% respectively. In the last twenty-one years some rough going in 1987 (October Crash), 1991 (Yugoslav War), 1994 (Dems lose 54 House Seats in Midterms), 2000 (undecided election), pushed November down in the rankings to third and fourth for the S&P and NASDAQ but it remained in the second spot on the Dow.
In the last nine years November is the number-two month behind October, except for the Russell 2000 index of small stocks for which November is first, December second and October third. This brings up what is often referred to as the “November Effect.” The contention is that what used to be known as the “January Effect,” the long standing tendency for small caps to outperform big caps in January, now begins in November.
Small caps still have their day in January but, it has often paid to begin accumulating small stocks in late October and November on weakness before their big seasonal moves. We also contend that most of this small-cap effect transpires in the last two weeks of December and benefits greatly from the yearend Santa Claus Rally.
There is still plenty more to cheer about. November boasts eleven bullish days and only one bearish day. Three bullish days come early in the month with the Dow up 22 of the last 29 first trading days, though the last two have been down. The market is less bullish heading into Thanksgiving and strong from the day before through the second to last day of the month with six bullish days in a row. The last day of the month has been terrible and the only bearish day with 2006 breaking an eight-year losing streak. This supports our strategy of buying into weakness ahead of Turkey Day and selling into strength after.
STANDARD TRADING GUIDELINES!
BUY LIMITS ARE GOOD TILL CANCELLED.
ALL STOPS EFFECTIVE ONLY WHEN THE STOCK CLOSES BELOW THE STOP PRICE.
ALWAYS SELL HALF ON A DOUBLE.
Please Trade Carefully.
Jeffrey A. Hirsch, Editor
J. Taylor Brown, Director of Research
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Pursuant to the provisions of Rule 206 (4) of the Investment Advisers Act of 1940, readers should recognize that not all recommendations made in the future will be profitable or will equal the performance of any recommendations referred to in this Email issue. The information presented in this Almanac Investor has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. The security portfolio of the editor, its employees, or affiliated companies may, in some instances, include securities mentioned in this Almanac Investor Alert.
