The historical trend is about to turn bullish for stocks. The Stock Trader’s Almanac has issued a seasonal buy signal for stocks, saying investors who sold off stocks in May can now start returning to the market as the calendar approaches its historically best six months of the year. The six-month period between November and April sees stock markets perform well, while May to October is typically lackluster. Look what happened to the Dow Jones Industrial Average. According to the Almanac, the November-to-April period has accounted for the bulk of the benchmark index’s gains since 1950, with a cumulative gain of 26,250 points, while the relatively weaker May-October period saw the average gain just 7,634 points. The same goes for the S&P 500. During its best six months, the S&P 500 gained 3,019 points, while during its worst six months, the S&P 500 gained 1,133 points. The Almanac adds that in addition to seasonal trends, looking at a technical trading indicator called the Moving Average Convergence Divergence indicator can help investors determine when to start adding to stock positions. “Starting on the first trading day of October, we hope to capture the first signs of an uptrend in the market after the summer slump,” the Almanac wrote in an announcement to subscribers. “Starting on the first trading day of April. The trading day begins and we are ready to exit these seasonal positions as soon as the market shakes.” .SPX YTD mountain S&P 500 There have been some years in history where investors have experienced double-digit losses from November to April. The period starting in 2019, before the outbreak of the Covid-19 pandemic; during the 2008 financial crisis; during the 1973 OPEC oil embargo; and the 1970 invasion of Cambodia. In fact, performance from May to October this year was unexpectedly strong. After pulling back in early August, the Dow Jones Industrial Average and S&P 500 have recovered all their losses and are now opening at record highs this week, sparking concerns among some that the stock market is overbought. On Monday, the 30-stock Dow Jones Industrial Average surpassed the 43,000-point mark, while the S&P 500 recently surpassed the 5,800-point mark for the first time.
