October often evokes fear on Wall Street as memories are stirred of crashes in 1929, 1987, the 554-point drop on October 27, 1997, back-to-back massacres in 1978 and 1979, Friday the 13th in 1989 and the 733-point drop on October 15, 2008. During the week ending October 10, 2008, Dow lost 1,874.19 points (18.2%), the worst weekly decline in our database going back to 1901, in point and percentage terms. The term “Octoberphobia” has been used to describe the phenomenon of major market drops occurring during the month. Market calamities can become a self-fulfilling prophecy, so stay on the lookout and don’t get whipsawed if it happens.
But October has become a turnaround month—a “bear killer” if you will. Twelve post-WWII bear markets have ended in October: 1946, 1957, 1960, 1962, 1966, 1974, 1987, 1990, 1998, 2001, 2002 and 2011 (S&P 500 declined 19.4%). However, eight were midterm bottoms. Over the last 21 years, October’s performance has been solid. Average gains in over the last 21-years range from 1.6% by Russell 1000 to 2.5% by NASDAQ. Small-caps have still struggled though with Russell 2000 gaining a modest 0.6%
Pre-election year Octobers are ranked second from last for DJIA, S&P 500 and NASDAQ while Russell 2000 is dead last with an average loss of 1.9%. Eliminating gruesome 1987 from the calculation provides only a moderate amount of relief. Should a meaningful decline materialize in October it is likely to be an excellent buying opportunity, especially for depressed technology and small-cap shares.
Options expiration week in October provides plenty of opportunity. On the Monday before expiration the DJIA has only been down eight times since 1980 and the Russell 2000 is up twenty-two of the last twenty-nine years, seventeen straight from 1990 to 2006. Expiration day has a spotty record as does the week as a whole. After a market bottom in October, the week after is most bullish, otherwise it is susceptible to downdrafts.
October is also the end of the Dow and S&P 500 “Worst 6 Months” and NASDAQ “Worst 4 Months”. Remain attentive for our Seasonal Buy Signal that can occur anytime beginning October 1. An email Alert will be sent when it triggers.
| October (1950-2018) |
| |
DJI |
SP500 |
NASDAQ |
Russell
1K |
Russell 2K |
| Rank |
|
7 |
|
7 |
|
9 |
|
7 |
|
12 |
| #
Up |
|
41 |
|
41 |
|
26 |
|
25 |
|
22 |
| #
Down |
|
28 |
|
28 |
|
22 |
|
15 |
|
18 |
| Average
% |
|
0.6 |
|
0.8 |
|
0.6 |
|
0.8 |
|
-0.5 |
| 4-Year Presidential Election Cycle Performance
by % |
| Post-Election |
|
0.9 |
|
1.0 |
|
1.4 |
|
0.9 |
|
0.3 |
| Mid-Term |
|
2.6 |
|
2.7 |
|
3.1 |
|
3.5 |
|
2.4 |
| Pre-Election |
|
-0.5 |
|
0.1 |
|
0.05 |
|
0.2 |
|
-1.9 |
| Election |
|
-0.8 |
|
-0.7 |
|
-2.1 |
|
-1.5 |
|
-2.8 |
| Best & Worst October by % |
| Best |
1982 |
10.7 |
1974 |
16.3 |
1974 |
17.2 |
1982 |
11.3 |
2011 |
15.0 |
| Worst |
1987 |
-23.2 |
1987 |
-21.8 |
1987 |
-27.2 |
1987 |
-21.9 |
1987 |
-30.8 |
| October Weeks by % |
| Best |
10/11/74 |
12.6 |
10/11/74 |
14.1 |
10/31/08 |
10.9 |
10/31/08 |
10.8 |
10/31/08 |
14.1 |
| Worst |
10/10/08 |
-18.2 |
10/10/08 |
-18.2 |
10/23/87 |
-19.2 |
10/10/08 |
-18.2 |
10/23/87 |
-20.4 |
| October Days by % |
| Best |
10/13/08 |
11.1 |
10/13/08 |
11.6 |
10/13/08 |
11.8 |
10/13/08 |
11.7 |
10/13/08 |
9.3 |
| Worst |
10/19/87 |
-22.6 |
10/19/87 |
-20.5 |
10/19/87 |
-11.4 |
10/19/87 |
-19.0 |
10/19/87 |
-12.5 |
| First Trading Day of Expiration Week: 1990-2018 |
| #Up-#Down |
|
22-7 |
|
20-9 |
|
19-10 |
|
21-8 |
|
22-7 |
| Streak |
|
D1 |
|
D1 |
|
D1 |
|
D1 |
|
U2 |
| Avg
% |
|
0.6 |
|
0.5 |
|
0.6 |
|
0.6 |
|
0.5 |
| Options Expiration Day: 1990-2018 |
| #Up-#Down |
|
15-14 |
|
18-11 |
|
19-10 |
|
18-11 |
|
13-16 |
| Streak |
|
U2 |
|
D1 |
|
D1 |
|
D1 |
|
D1 |
| Avg
% |
|
0.04 |
|
0.02 |
|
0.02 |
|
0.02 |
|
-0.08 |
| Options Expiration Week: 1990-2018 |
| #Up-#Down |
|
21-8 |
|
21-8 |
|
16-13 |
|
20-9 |
|
16-13 |
| Streak |
|
U4 |
|
U4 |
|
D1 |
|
D1 |
|
D1 |
| Avg
% |
|
0.8 |
|
0.8 |
|
1.0 |
|
0.8 |
|
0.6 |
| Week After Options Expiration: 1990-2018 |
| #Up-#Down |
|
18-11 |
|
15-14 |
|
16-13 |
|
15-14 |
|
14-15 |
| Streak |
|
D1 |
|
D1 |
|
D1 |
|
D1 |
|
D3 |
| Avg
% |
|
0.3 |
|
0.1 |
|
0.2 |
|
0.06 |
|
-0.09 |
| October 2019 Bullish Days: Data 1998-2018 |
| |
3,
4, 14, 16 |
3,
14, 16-18, 21 |
3,
14, 16, 23, 31 |
3,
14, 16-18, 21 |
18, 31 |
| |
28,
30 |
23,
24, 30, 31 |
|
23,
30, 31 |
|
| October 2019 Bearish Days: Data 1998-2018 |
| |
7,
11, 25 |
7,
11, 25 |
None |
7,
11, 25 |
7, 8, 10, 25 |
| |
|
|
|
|
|