Seasons in the Market

Some important things to keep in mind that may or may not be affecting market action, but regardless demand the attention of anyone considering owning equities (stocks).

The market has a history of seasonal patterns. It is very common for markets to rally higher into years end, as portfolio managers who control the big money that moves market direction, make sure they own the right stocks so that when their clients get their portfolio statements, the managers avoid being fired for not owning the winners.

January is often a selloff month as managers dump the stocks that they purchased primarily to “window dress” the portfolio.

Let’s look at one chart today. The SPY is an excellent chart to look at every day. The market has thousands of stocks, but the SPY is an excellent ETF that racks the trend of the overall market. Look it up and study what it is composed of in terms of underlying holdings. On a weekly view, the SPY is trending up, despite the daily oscillations and despite the short term correction in which we noe find ourselves. The SPY hit highs in the years 2000, 2007, and is now approaching a third test of those highs. We are now at around 139, with 155 or so being the highs. The market seems to test and bounce of important numbers. I think we test those highs before year and and am positioning myself to be involved for that test. I manage risk by placing a stop on weak stocks in my portfolio if the SPY is also weak and breaks below 130. In that case, no retest this year.

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