October 22, 2011 at 12:12 PM EDT
Next Week More Critical Than Most for Markets!
Saturday, October 22, 2011. 12:00 noon. As I noted in my weekend column ‘If Only We Could Ignore Europe!’, recent economic indicators have been showing signs that the U.S. economy may have bottomed and begun to recover. But unfortunately, global markets and economies are again being held hostage by the euro-zone debt and banking crisis. [...]

Saturday, October 22, 2011. 12:00 noon.

As I noted in my weekend column ‘If Only We Could Ignore Europe!’, recent economic indicators have been showing signs that the U.S. economy may have bottomed and begun to recover. But unfortunately, global markets and economies are again being held hostage by the euro-zone debt and banking crisis.

The decisions European officials make this weekend, and at next Wednesday’s meeting, will be more important than any they have made since the crisis began 18 months ago.

Time has run out. Investors, global central banks, rating agencies, etc., have run out of patience with the repeated raising of hope by announcements that only kick the crisis down the road a few weeks, and then are dashed when it becomes apparent they will fail to even contain the crisis, let alone resolve it.

Next week’s decisions and announcements must provide the promised unprecedented measures that will assure that the crisis fades into the background.

It’s too bad there are so many conflicting reports and remarks coming out of Europe that have the outcome in doubt.

For the most part, global markets have rallied strongly again the last couple of weeks solely on the hopes provided by the latest promises. The risk of a disappointing decision, or no decision at all, can be seen by the big one and two-day market tumbles in the midst of the rally each time cold water was poured on the hopes by some less than positive remark by a European official.

Any disappointment will affect most markets.

For instance, so far so good on our recent sell signal for U.S. treasury bonds and position in an ‘inverse’ etf against bonds.

But if a disappointing decision from Europe ends the stock market rally, bonds, even though extremely overbought above their 30-week m.a., could reverse to the upside again as a safe haven play.

102211a

The U.S. stock market also has some iffy situations. We know what our technical indicators (not shown) are telling us.

Meanwhile, short-term, the S&P 500 has broken out to the upside from the volatile trading band that has had it confined since August. And that’s a continuing potential positive.

102211b 

But on the intermediate-term charts the rally so far only has it up to the potential resistance at its important 20-week m.a.

102211c

The two charts indicate the importance to market direction of next week’s decisions from Europe.

Gold is also at an interesting juncture.

On the short-term chart its most recent rally attempt has failed at the 30-day m.a.

102211d

But on the intermediate-term chart, it still hasn’t broken beneath the potential support at its 30-week m.a.

102211e

We know what our technical indicators are telling us to expect, but obviously the markets are all at interesting junctures.

Mark Hulbert on our Seasonal Timing Strategy.

Here’s more confirmation from another independent and respected source regarding the market’s seasonality, and in particularly the way we harness it for superior performance and low risk in our Seasonal Timing Strategy.

Mark Hulbert, long-time respected editor of The Hulbert Financial Digest, had an article about seasonality on MarketWatch on October 11. Mark often refers to the ‘Sell in May and Go Away’ pattern, which calls for exiting the market May 1 and re-entering November 1 as the “Halloween Indicator”.

His recent MarketWatch article was titled ‘Wall Street’s Early Halloween Party’.

In it he compares the performance from May 31, 2002 (when he began tracking our Street Smart Report) through September 30, 2011, of:

  1. The market on a buy & hold basis.
  2. Sell in May and Go Away
  3. Sy Harding’s Street Smart Report
  4. Almanac Investor Report.
    Some quotes from the article:
    ”I know, I know, Halloween is still three weeks away. But the stock market’s strength since the beginning of October is leading at least some to wonder if the venerable Halloween Indicator has kicked in early this year. You may know this indicator by its other name, ‘Sell in May and Go Away’.”
    ”According to a comprehensive review of its track record that appeared in the December 2002 issue of the prestigious academic journal, American Economic Review, this pattern has existed in 36 of 37 countries studied. In each of those countries, average stock market returns from Halloween through May Day were significantly higher than equity returns from May Day through Halloween.”
    ”Two timers strategies for improving the Halloween Indicator are quite similar – at least in theory. Both rely on the MACD to decide when (if at all) to get the buy and sell signals.”
    Despite the similarities, the two strategies have significantly different returns.  This is well illustrated by the accompanying table, which reflects Hulbert Financial Digest data for these two strategies’ returns back to mid-2002, calculated on the assumption that when they are invested they obtain the return of the Wilshire 5000 total-return index; otherwise they are assumed to be invested in 90-day T’bills.”

     Annualized ReturnRisk levelSharpe Ratio
    Buy & Hold3.4%100%0.05
    Halloween Indicator6.3%63%0.14
    Sy Harding’s Street Smart Report7.8%61%0.18
    Almanac Investor Report5.1%62%0.11

    It’s another report that confirms that our Seasonal Timing Strategy more than doubles the performance of buy & hold over the long term and with considerably less risk.
    Our STS is working out quite well again this year, up 11.3% for the year-to-date as of yesterday’s close, versus the S&P 500 being down 1.2% year-to-date on a buy and hold basis, even after the big rally of the last 3 weeks.
    The out-performance of our STS in the table would have been much more dramatic if Mark had begun tracking our performance before mid-2002, so that the 2000-2002 bear market was included. Our STS strategy was profitable in each of 2000, 2001, and 2002, three straight years when the S&P 500 lost 9.1%, 11.9%, and 22.1%.
    By the way, there is a reason why the Almanac Investor Report’s seasonal strategy is similar to ours. When I revealed the Seasonal Timing Strategy methodology in my 1999 book Riding the Bear – How to Prosper in the Coming Bear Market, the Hirsch’s back-tested it and were so impressed that they ‘adopted it’ as their own, replacing their ‘Best Six Months’ strategy, which was based on the Sell in May and Go Away pattern, with my Seasonal Timing Strategy, but renaming it their ‘Best Six Months Plus MACD’ strategy.

To read my weekend newspaper column ‘If Only We Could Ignore Europe!’ click here!

Subscribers to Street Smart Report: In addition to the charts and signals in the premium content area of today’s blog, the new issue of the newsletter from Wednesday is in the subscribers’ area of the Street Smart Report website.

Yesterday in the U.S. Market.

A very positive day to end a mixed week. Volume picked up to 1.2 billion shares traded on the NYSE, and market breadth was very positive.

The Dow closed up 267 points, or 2.3%. The S&P 500 closed up 1.9%. The NYSE Composite closed up 2.2%. The Nasdaq closed up 1.5%. The Nasdaq 100 closed up 1.3%. The Russell 2000 closed up 2.3%. The DJ Transportation Avg. closed up 2.2%. The DJ Utilities Avg closed up 1.7%.

Gold closed up $28 an ounce at $1,640 an ounce, but down sharply for the week.

Oil closed up $1.48 a barrel at $87.55.

The U.S. dollar etf UUP closed down 0.9%.

The U.S. Treasury bond etf TLT closed down 1.1%.

Yesterday in European Markets.

European markets closed up strongly for the day but not for the week. The London FTSE closed up 1.9%. The German DAX closed up 3.6%. And France’s CAC closed up 2.8%.

Global markets for the week.

A mixed week in the U.S. Most global markets were down for the week, not as confident about the upcoming decisions from Europe as the U.S. market.

THIS WEEK (October 21)
DJIA11808+ 1.4%
S&P 5001238+ 1.1%
NYSE7431+1.1%
NASDAQ2637- 1.1%
NASD 1002335- 1.5%
Russ 2000712- 0.1%
DJTransprts4813+ 2.6%
DJ Utilities453+ 3.2%
XOI Oils1,205+ 3.9%
Gold bull.1,639- 2.4%
GoldStcks185- 6.5%
Canada11949- 1.1%
London5488+ 0.4%
Germany5970+ 0.1%
France3171- 1.4%
Hong Kong18025- 2.6%
Japan8678- 0.8%
Australia4203- 1.6%
S. Korea1838+ 0.2%
India16785- 1.7%
Indonesia3620- 1.2%
Brazil55255+ 0.4%
Mexico35020+ 0.5%
China2427- 4.7%
LAST WEEK (October 14)
DJIA11644+ 4.9%
S&P 5001224+ 6.0%
NYSE7350+6.1%
NASDAQ2667+ 7.6%
NASD 1002371+ 7.7%
Russ 2000712+ 8.6%
DJTransprts4691+ 7.6%
DJ Utilities438+ 1.7%
XOI Oils1,160+ 8.6%
Gold bull.1,680+ 2.5%
GoldStcks198+ 5.5%
Canada12081+ 4.2%
London5466+ 3.1%
Germany5967+ 5.2%
France3217+ 3.9%
Hong Kong18501+ 4.5%
Japan8747+ 1.6%
Australia4269+ 1.0%
S. Korea1835+ 4.3%
India17082+ 5.2%
Indonesia3664+ 7.0%
Brazil55021+ 7.4%
Mexico34848+ 5.6%
China2546+ 3.0%
PREVIOUS WEEK (October 7)
DJIA11103+ 1.7%
S&P 5001155+ 2.1%
NYSE6925+ 2.0%
NASDAQ2479+ 2.6%
NASD 1002202+ 3.0%
Russ 2000656+ 1.9%
DJTransprts4359+ 4.1%
DJ Utilities431- 0.5%
XOI Oils1,068+ 3.6%
Gold bull.1,639+ 1.0%
GoldStcks187+ 1.3%
Canada11588- 0.3%
London5303+ 3.4%
Germany5675+ 3.1%
France3095+ 3.8%
Hong Kong17707+ 0.7%
Japan8605- 1.1%
Australia4225+3.8%
S. Korea1759- 0.6%
India16232- 1.3%
Indonesia3425- 3.5%
Brazil51243- 1.8%
Mexico33005- 1.5%
China24710%
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In the premium area today: U.S. stock market. Seasonal Timing. Gold. Bonds.


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Next  week’s Economic Reports:

Next week will be a fairly heavy week for potential market-moving economic reports, including  Consumer Confidence, Durable Goods Orders, New home Sales, and the first look at 3rd quarter GDP growth. To see the full schedule of the week’s reports click here, and look at the left side of the page it takes you to.

And we are supposed to get the European debt recovery plan from Europe.

To read my weekend newspaper column ‘If Only We Could Ignore Europe!’ click here!

Subscribers to Street Smart Report: In addition to the charts and signals in the premium content area of today’s blog, the new issue of the newsletter is in the subscribers’ area of the Street Smart Report website from Wednesday.

I’ll be back with the next regular blog post on Tuesday morning at 9:25 a.m. Have a great weekend!

Non-subscribers: How are you doing so far in 2011? We can help, and at very reasonable cost! Market, sector, stock, gold, bond, and dollar buy and sell signals, short-sales, long-side and ‘inverse’ etf’s, mutual funds, two portfolios of recommended holdings (one modified buy and hold, and one market-timing). Street Smart Report Online provides an 8-page newsletter every 3 weeks, an in-depth 6 page interim update every Wednesday on our intermediate-term signals and recommended holdings, an in-depth 4-page ‘Gold, Bonds, Dollar’ update every 2 weeks, and special reports and hotline updates as needed. Highly regarded and in our 24th year. As a bonus for a one-year subscription you will also receive my latest book Beat the Market the Easy Way- Proven Seasonal Strategies That Double the Market’s Performance. Click here for subscription information.

This blog appears every Tuesday, Thursday, and Saturday morning!

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