Zeev's Turnips Patch-No Politics (ZEEV)

[Ace Hanlon]

The August Syndrome

by Rick Ackerman

Will the Dow Industrials muster a last-gasp surge to my long-standing target at 9582? The blue chip bellwether feels like it’s running out of steam, so we should prepare for the possibility that the middling bear rally begun in March will end without having quite reached its “official” target. It would not be the first time that I became so fixated on a “high-confidence” rally target that I missed the first leg of the reversal.  What a galling irony that would be, since I’ve been skeptical of the rally for months, even if my mechanically bullish targets have kept us on the right side of it all along. Anyway, let’s not get too wrapped up in the 9582 thing, lest we miss a bearish turn from somewhere just below it. 
 
I am evidently not the only market technician who thinks that such a turn is imminent.  Peter Eliades, one of the very best timers in the business (and ranked #1 by Hulbert’s for five consecutive years), notes in his latest Stock Market Cycles update that August has been a standout month for important market turns.  Here’s the record, going back 16 years:
 
August 25th, 1987:  the exact top prior to the crash
August 23rd, 1988:  low has never been returned to
August 24th, 1995:  low has never been returned to
August 19th, 1998:  top preceding 18% plunge in 2 weeks
August 31st, 1998:  important bottom
August 25th, 1999:  all-time high, then 14% plunge
August 31st, 2000:  2 days before all-time high on NYCI
August 24th, 2001:  end of rally-down 22% in under a month
August 22nd, 2002: exact rally top-down 21% in under a month
 
“It is a pretty imposing history, especially over the last five years,” notes Peter. “There should be little doubt what kind of a turn might be seen if this August joins the prior months of August in providing an important market turn. It is noteworthy, however, that the earliest August turn listed above occurred on August 19th. The implication is that we may have to wait several more days before a final top is registered. Let's be patient and see if the August syndrome appears again.”