A Doubtful Rally

The two-day rebound rally has resulted in a 6.8% gain in the NASDAQ Composite and a 6.4% gain in the S&P 500. But the tide has not completely turned. Intraday charts of all the major indexes do not show steady rises into the close – there were bouts of strong selling in getting the higher closes.

The NYSE Advance/Decline line logged a nice two-day jump, but still remains below the average of the downtrend (a regression line drawn from the high back in April).

Investor's Business Daily's Accumulation/Distribution ratings for both the NASDAQ Composite and the Dow Jones Industrial Average have increased from ‘E' to ‘D-‘, so I suppose that is a positive (yes, that was a bit of sarcasm).

Over the years, the Q3 earnings releases, along with pre-announcements, have had a lot of influence over the markets. For example, this seasonal pattern for the S&P 500 shows that over the next 6 weeks, the S&P has declined slightly more than it has gained, both in average gain/loss and in the number of years with gains vs. losses.

All the other major indexes, and many large-cap stocks, show a similar pattern. What is the significance of the next 6 weeks? It is 6 weeks until the start of the Q3 earnings releases.

In other words, the track record of the markets as we head through September into early October is mixed. A trader looking for success will likely need to spend considerably more time finding quality stocks that are ignoring the noise and generating consistent gains in revenue, earnings, and price appreciation.

Once we get on the tail-end of Q3 earnings reports, around late October, the seasonal patterns of many stocks jump because institutions have traditionally staked their final bets for good year-end results. As we get through October, as long as the economy and news events cooperate, traders won't have to be as selective to find good short-term trades and longer-term investments.

Of course, there's much more you need to know and many more stocks you can capitalize upon each and every day.  To find out more, please click on the following link: www.markettamer.com/seasonal

By Gregg Harris, MarketTamer Chief Technical Strategist

Copyright (C) 2015 Stock & Options Training LLC

Unless indicated otherwise, at the time of this writing, the author has no positions in any of the above-mentioned securities.

Gregg Harris is the Chief Technical Strategist at MarketTamer.com.

The content on any of Market Tamer websites, products, or communication is for educational purposes only. Nothing in its products, services, or communications shall be construed as a solicitation and/or recommendation to buy or sell a security. Trading stocks, options, and other securities involve risk. The risk of loss in trading securities can be substantial. The risk involved with trading stocks, options and other securities are not suitable for all investors. Prior to buying or selling an option, an investor must evaluate his/her own personal financial situation and consider all relevant risk factors. See: Characteristics and Risks of Standardized Options (http://www.optionsclearing.com/publications/risks/riskstoc.pdf). The www.MarketTamer.com educational training program and software services are provided to improve financial understanding.

 

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