By George Leong for Investment Contrarians
In my previous article, I discussed the new record highs achieved by the stock market and how it looks like there will be more gains to come.
Yet based on what we have seen over the past few decades, something appears to be out of whack. I’m sure many of you also realize this seeming discrepancy but are happy to ride the stock market advance anyway.
Let me explain.
The six-month period from June to October has historically been the worst period for the stock market, according to the Stock Trader’s Almanac.
But the S&P 500 advanced by about eight percent in this period of supposed weakness. The stock market actually saw the S&P 500 and DOW Industrial rally to multiple record-highs.
It’s clear that something is out of whack, and that “something” appears to be a mispricing in the stock market.
If you believe in the historical tendencies—that is, despite the contradictory action in the June–October period this year—there will be more gains to come and more opportunities to make money. This means that it’s not the time to exit the stock market yet; instead, it’s time to look for opportunities to buy, especially on weakness.
The facts show that investing in the six months from November to May has produced the best returns for the stock market versus the June to October period, according to the Stock Trader’s Almanac.
So, having seen an eight-percent advance in the S&P 500 from June to October, should we expect to see an even bigger advance over the next five months to May? Based on what I’m seeing, it does look like the bulls are in full control of the stock market, while the bears are set to hibernate for the winter months and then some if history pans out.
The reality is that the more I try to look at the negatives—such as the weak jobs market, surging debt levels, muted economic renewal, and the lack of corporate revenue growth—the more I shake my head while all signs point to higher gains ahead in 2014.
Of course, things can easily change, including my sentiment. If, for example, the Federal Reserve decides to begin tapering in a few weeks, then we could see stocks stall.
And if the two parties cannot come up with a resolution to the government’s budget and debt ceiling increase by the new deadlines set in January and February, we could see another government impasse surface, with America’s image on the global stage taking another negative hit.
But for now, stocks are definitely looking higher in spite of the fragile economy. The only thing for investors to do now is to follow the Stock Trader’s Almanac and ride the stock market higher.
See original article: http://www.investmentcontrarians.com/stock-market/time-to-take-a-page-out-of-the-almanac-this-winter/3378/
