Octobers in years ending in 7:
From one month ago, worth repeating.
Octobers in years ending in 7:
I looked at the October DOW for the 10 years that end in 07 beginning with 1907 and ending with 1997. The reason I did this is that I heard someone say something to the effect of "7" years got hammered in October. So, I decided to find out the facts. As always, I'm sharing them FREE OF CHARGE to my fellow VMC'ers.
Charts are below. But, before you go there, I have a few points to make. It is generally true that a 12 month calendar year will show the DOW getting better from January to December. The main reasons are that historically, markets go up with time, but also, December is a very good month.
The first interesting thing to note is that this is generally NOT true for "7" years. Three of them had their highs in January and only one of the 10 was after mid September. That alone says that something is going on.
There are two primary points to make: 1) From early October in year "7"s the markets generally get hammered until later in October and 2) If you buy on those lows, one year later, you will be very happy.
SELLING
In the first chart below, you will see a column called (10-2). That represents the close of the second trading day in October. It could have been October 2nd, 3rd or 4th, but October 2nd is the most common second trading day. I tested every day from the 6 previous trading days from October 1st to the 5 following trading days from September 30th - 11 days in all. The day that had the best average peak was the close of the 2nd trading day of October.
What is definitely fascinating is that the October lows were all after the 18th. There is very little chance of that purely by random.
You will also notice that nine of the ten years had losses from the close of the second trading day in October to the low of the month after the 18th. Only 1947 was slightly positive. I chose the 22nd for that year as being a generally representative date.
For all intents and purposes, it is reasonable to say that, on average, for the ten "7" years, the DOW was -11.44% from just after the beginning of October to approximately three weeks later.
Keep in mind that these are closing prices. No doubt, the intraday lows of the worst day in October were worse - possibly another percent or two.
Of course, the obvious next question would be what if you bought on those October lows. Where were the markets in 1 month, 3 months, 6 months and 1 year? Those results are farther down.Year High Low 10-2 OCT LOWS PCT
1907 1-7 11-15 67.92 29th 57.70 -15.05
1917 1-3 12-19 83.49 31st 74.50 -10.76
1927 12-23 1-27 199.78 22nd 179.78 -10.01
1937 3-6 11-24 154.08 18th 125.73 -18.40
1947 7-29 5-17 178.47 23rd 184.50 + 3.38
1957 7-12 10-22 465.03 22nd 419.79 - 9.72
1967 9-25 1-03 924.47 30th 886.62 - 4.09
1977 1-3 11-02 842.00 25th 801.54 - 4.81
1987 8-25 10-19 2640.99 19th 1738.74 -34.16
1997 8-6 4-11 8027.53 27th 7161.15 -10.79
AVERAGE -11.44
BUYING
As you can see below, every one of the ten years was higher 12 months later. The Dow average is +18.70%. There is an inverse correlation between how badly the markets were hammered the previous October and how well they performed coming out of it. Once again, 1947 was the weakest, but it was also the only one that had gains in the first three weeks of October. The next two best Octobers (1967 and 1977) are also the next two weakest a year later.
Therefore, the probabilities are high that if there is a significant drop in the first few weeks of October, that the rebound will be disproportionately high for the following year.
Personally, that won't get me to jump in unless the markets drop 20-30% or more between now and then. But, the numbers say you should get in, for all intents and purposes, regardless of how badly the DOW gets hit in October... but you can't get in if you are fully invested, so part and parcel with this theory is freeing up cash before the close of October 2, 2007.Year OCTOBER LOW 1 Mo. 3 Mo. 6 Mo. 12 Mo.
1907 10-29 57.51 -0.33% + 7.59% +21.82% +26.78%
1917 10-31 74.50 -2.22% + 7.40% + 4.32% +15.09%
1927 10-22 179.78 +9.13% +10.39% +17.31% +41.06%
1937 10-18 125.73 -0.20% + 4.61% - 5.36% +20.97%
1947 10-23 184.50 -1.18% - 6.79% - 0.39% + 3.08%
1957 10-22 419.79 +5.45% + 6.17% + 7.09% +29.19%
1967 10-30 886.62 -1.22% - 2.94% + 3.00% + 7.54%
1977 10-25 801.54 +5.35% + 9.64% + 4.00% + 3.58%
1987 10-19 1738.74 +9.01% +11.37% +15.00% +22.92%
1997 10-27 7161.15 +8.84% + 9.13% +24.53% +16.83%
AVERAGES +3.26% + 5.66% + 9.32% +18.70%
Len
