Seasonal Trading: November Patterns

11/01/2016 8:00 am EST

Focus: STOCKS

Jeffrey Hirsch

Editor-in-Chief, The Stock Trader's Almanac and Almanac Investor

November begins the “Best Six Months” for the DJIA and S&P 500, and the “Best Eight Months” for NASDAQ, explains Jeffrey Hirsch, editor of Stock Trader's Almanac and leading expert on trading strategies based on historical and seasonal patterns. 

Small caps come into favor during November but don’t really take off until the last two weeks of the year. November is the number-three DJIA and number-two S&P 500 month since 1950.

Since 1971, November ranks third for NASDAQ. November is best for Russell 1000 and Russell 2000 second best since 1979.

November maintains its status among the top performing months as fourth-quarter cash inflows from institutions drive November to lead the best consecutive three-month span November-January.

The month has taken hits during bear markets and November 2000, down 22.9% (an undecided election and a nascent bear), was NASDAQ’s second worst month on record—only October 1987 was worse.

November is a mixed bag in presidential election years. DJIA has advanced in 9 of the last 16 election years since 1952 with an average gain of 1.5%. Significant DJIA declines occurred in 2008 (-5.3%) and 2000 (-5.1%).

Options expiration often coincides with the week before Thanksgiving. DJIA posted ten straight gains 1993-2002 and has been up 18 of the last 23 weeks before Thanksgiving. Options expiration day has a clearly bullish bias, up 12 of the last 14.

Being a bullish month November has six bullish S&P days, though it does have weak points. NASDAQ and Russell 2000 exhibit the greatest strength at the beginning and end of November.

Recent weakness around Thanksgiving has shifted DJIA and S&P 500 strength to mirror that of NASDAQ and Russell 2000 with the majority of bullish days at the beginning and end of the month.

The best way to trade Thanksgiving is to go long into weakness the week before the holiday and exit into strength just before or after.

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By Jeffrey Hirsch, Editor of Stock Trader's Almanac

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