October 2023 Almanac & Vital Stats: A Turnaround Month
By: Jeffrey A. Hirsch & Christopher Mistal
September 21, 2023
Buy In October and Get Your Portfolio Sober!
Kick-Off the “Best Six Months” LIVE and in-person with Jeff at the MoneyShow/TradersEXPO Orlando October 29-31 and the 2023 New Orleans Investment Conference November 1-4. Ring in the pre-election year Q4 rally with me in the flesh at these two world-class events. September seasonal weakness and Octoberphobia are likely to scare the market ahead of this Halloween tour over the next several weeks. Come join me so we can discuss in person how to implement my Best Six Months Tactical Seasonal MACD Buy Signal, our next market moves, and what stocks and ETFs I will be buying and selling this season.
October 2023 Almanac & Vital Stats
October can evoke fear on Wall Street as memories are stirred of crashes in 1929, 1987, the 554-point DJIA drop on October 27, 1997, back-to-back massacres in 1978 and 1979, Friday the 13th in 1989 and the 733-point DJIA drop on October 15, 2008. During the week ending October 10, 2008, DJIA lost 1,874.19 points (18.2%), the worst weekly decline, in percentage terms, in our database going back to 1901. March 2020 now holds the dubious honor of producing the largest and third largest DJIA weekly point declines. 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.
October has been a turnaround month—a “bear killer” if you will, turning the tide in thirteen post-WWII bear markets: 1946, 1957, 1960, 1962, 1966, 1974, 1987, 1990, 1998, 2001, 2002, 2011 (S&P 500 declined 19.4%), and 2022. DJIA was first to bottom last year on the last day of September. S&P 500 ended its bear market on October 12 while NASDAQ did not reach a final closing low until December 28. Eight of these were midterm years. While not in an official bear market this year, the market is suffering through typical seasonal weakness which could once again come to an end in October.
Over the last twenty-one years, the full month of October has been a solid month for the market, ranking #2 for DJIA and NASDAQ, #4 for S&P 500. DJIA, S&P 500, NASDAQ, Russell 1000 and Russell 2000 have all recorded gains ranging from 1.3% by Russell 2000 to 2.2% by NASDAQ. But these gains have come with volatile trading, most notably during the early days of the month. October has opened softly with modest average gains on its first trading day. On the second day, all five indexes have been weak followed by a rebound on the third trading day before additional weakness pulled the market lower through the seventh trading day. At which point, the market has historically found support and begun to rally through mid-month and beyond. In pre-election years since 1950, October has been stronger in the first half of the month and weaker in the second half. October 1987’s substantial declines heavily influence the pre-election year pattern.
[October 21-Yr Seasonal Patterns Chart]
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 1.5%. Eliminating gruesome 1987 from the calculation provides only a moderate amount of relief. Should current weakness persist into October it is likely to provide an excellent buying opportunity, especially for depressed technology and small-cap shares.
[Pre-Election Year October Performance Mini Table]
Options expiration week in October provides plenty of opportunity. On the Monday before monthly expiration DJIA has only been down 10 times since 1982 and the Russell 2000 is up twenty-four of the last thirty-three years, seventeen straight from 1990 to 2006. Expiration day has a mixed record while the week as a whole has been improving with S&P 500 recording eight straight weekly advances coming into this year. After a market bottom in October, the week after is most bullish, otherwise it is susceptible to downdrafts.
[October 2023 Vital Stats Table]
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 MACD Buy Signal which can occur anytime beginning October 2 (the first trading day of the month this year). We will email all members after the close when our seasonal buy triggers.