Is It Time To Buy Stocks Now?

A mid-day gain of nearly 200 points was completely wiped out and by 2:45 and the Dow (^DJI) was down over 150 points. It appeared the market was setting up for another death march into the last hour of trading, but that is when it did a 180 and began to rally. When the Dow closed it was up 151 points or 1.8%. The S&P 500 (^GSPC) gained 8 points or 1.0%. The NASDAQ (^IXIC) struggled to a one point gain, but did close 54 points off the intraday low. Both oil and gold closed little changed.

The late-day rally was a step in the right direction for the indices, which tested the October closing lows once again. It is not surprising that this market strings us along for a little while longer as it teeters on the verge of a rally off the lows or a breakdown to start a new leg lower. Nothing comes easy in this market and I do not expect that to change in the near future. We must continue to play the odds and be patient. Do not try and anticipate the next move of the market, rather wait for the market to indicate its next trend.

SEASONALITY IN OUR FAVOR

Over the last 58 years the best three months of the year for the market are November, December, and January. We are not off to the best start with the Dow down 10% in the first few weeks of the month, but there is plenty of time to turn it around by the end of the year.

The market has historically done very well during the upcoming three months and November is also the start of the best six months of the year. If you look back to 1998, the Dow has gained 4300 points during the November to April time frame. During the “worst six months of the year”, May through October, the Dow has lost 280 points. This is an amazing stat that shows the same discrepancy when looked at over a longer time period. So now that we are in the midst of the best six months of the year and the Dow is already down 900 points, is it time to buy?

I would never recommend buying purely on a seasonal statistic, but add in the fact the market is already 40% off the high, sitting on support (barely), and a number of indicators are screaming buy (VIX (^VIX), yield curve, etc.), it is not a bad time to either not sell or begin buying long-term stocks/ETFs if the market can hold the bottoms. I will touch more on the yield curve tomorrow and how it is giving a buy signal for long-term investors.

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