As of today’s close DJIA is up 5.1% year-to-date, S&P 500 is up 8.0% and NASDAQ is up a solid 15.5%. All three indexes are just a few percentage points below their respective all-time highs. S&P 500 and NASDAQ were at their highs in August while DJIA still has not cleared its January high. Nonetheless, DJIA, S&P 500 and NASDAQ are all well above historical average levels for this time of the year compared to past midterm years. S&P 500 and NASDAQ are also well above respective averages in all years.
Comparing “All Years” (solid red line) to “All Midterm” years (solid black line) in the charts above there is a well pronounced fourth quarter rally in both whether the index was positive for the year or not. The rally is present in “Midterm” years beginning right around the start of October and begins slightly later in October in “All” years. However, the magnitude of past fourth quarter rallies in “Midterm” years is notably greater across all three indexes than in “All” years. This pattern would seem to suggest that this year’s solid, above average midterm year gains could lead to a less than spectacular fourth quarter rally.
As always, please use protective buy and sell stops when trading futures and options.
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