Fall Weakness?-Not Yet Out of the Woods.

I spent some time earlier this month talking about how the September-October period is seasonally the weakest time for the markets. So far this month does not seem to be following that script. Month to date the market as measured by the S&P 500 is up 1.23%. This is a return slightly ahead of the past 10 years where the mid-September average is a gain of .31%

Data on September-October shows that the seasonal weakness previously discussed usually shows up around mid-month and puts in a low about mid-October.

Looking at the data for mid-September-October and using as a sample the past 10 years, the market has experienced a decline during this period averaging -6.57%. The market has never been up during this time. It's best performance was a -2.2% in 1997 which was a very good year for stocks. It's worst decline was in 2002 which was a horrible year for equities. Stocks fell -13.72% during this time that year.

This study covers every year but 2001 due to the events of 9-11 and the fact that the market was closed for a period of time during September of that year. If I had added in these numbers Autumns's results would have been worse.

Stocks on average bottomed in this study on October 17. The earliest bottom occurred on September 30th of 2003. 2003 was a bullish year for stocks. The latest bottom occurred on October 31. That was in 1997 which was also a bullish year for stocks.

This study had 4 years which my systems score as bullish years (1997-99 & 2003), 2 years scored as bearish (2000 & 2002) and 2 years scored as trendless (2004-2005). It is too soon to score 2006. Right now it tracks slightly bullish. Again I did not include 2001. 2001 scored bearish as well.

Nothing says that stocks can't break this pattern but I think it would be foolish to ignore the past and as for fall weakness, we are definitely not yet out of the woods.