November Almanac, Vital Stats & Strategy Calendar: By: By Jeffrey A. Hirsch & Christopher Mistal | October 27, 2015 | Email | Print

 

November maintains its status among the top performing months as fourth-quarter cash inflows from institutions drive November to lead the best consecutive three-month span November-January. The month has taken hits during bear markets and November 2000, down –22.9% (undecided election and a nascent bear), was NASDAQ’s second worst month on record—only October 1987 was worse.

 

November begins the “Best Six Months” for the DJIA and S&P 500, and the “Best Eight Months” for NASDAQ. Small caps come into favor during November, but don’t really take off until the last two weeks of the year. November is the number-three DJIA and number-two S&P 500 month since 1950. Since 1971, November ranks third for NASDAQ. November is now the number one month for Russell 1000 and second best for Russell 2000 since 1979.

 

In pre-election years, November’s performance is substantially weaker. DJIA has advanced in only half of the last 16 pre-election years since 1950 with an average gain of 0.3%. S&P 500 has been up in 9 of the past 16 pre-election years, also gaining on average a paltry 0.3%. Small-caps and techs perform better with Russell 2000 climbing in 5 of the past 9 pre-election years, averaging 1.0%. NASDAQ has been up in 6 of the last 11 pre-election year Novembers with an average 0.9% gain. Contributing to pre-election year November’s weaker performance is nasty declines in 1987, 1991 and 2007 

 

Options expiration often coincides with the week before Thanksgiving. DJIA posted ten straight gains 1993-2002 and has been up 17 of the last 22 weeks before Thanksgiving. The Monday of expiration week had been streaky with the DJIA up five straight, 1994-1998, during the bulk of the last 20th Century bull market, down five in a row, 1999-2003, up three, 2004-2006, but has been mixed since 2007, up four and down four. The net result is a bearish down 9 times in the last 16 years. Options expiration day has a clearly bullish bias, up 11 of the last 13. The week after expiration has been weak lately, down five of the last nine, but up 9.7% in 2008, enough to be the best November weekly DJIA performance since 1950.

 

Being a bullish month November has seven bullish S&P days, though it does have weak points. NASDAQ and Russell 2000 exhibit the greatest strength at the beginning and end of November. Russell 2000 is notably bearish on the 12th trading day of the month (November 17, 2015), when the small-cap benchmark has risen just five times in the last 31 years (since 1984). The Russell 2000’s average decline is 0.49% on the day. Recent weakness around Thanksgiving has shifted DJIA and S&P 500 strength to mirror that of NASDAQ and Russell 2000 with the majority of bullish days at the beginning and end of the month. The best way to trade Thanksgiving is to go long into weakness the week before the holiday and exit into strength just before or after.