Saturday , 23 October 2021

October’s Bad Reputation For Declines Is Justified – Here’s Why

October has begun – the month that has a particularly bad reputation for traders! Is that bad reputation justified?

The 20 Largest Daily Declines in the Dow Jones 

The table below shows the 20 strongest daily declines in the Dow Jones…I have marked in red the 9 extreme movements that occurred in the month of October…[and] that is way out of proportion. Clearly October has a tendency to have a lot of sharp price drops…

The Dow falls very often in October

Data source: Wikipedia, us.spindices.com

How does October perform on average?

…A look at the seasonal chart below shows the average trend over many years depending on the season of the Dow Jones over an extended period…In this instance, mean values are formed from the prices of 124 years. The horizontal axis of the chart shows the time of year, the vertical axis shows price information. The chart, therefore, shows the typical seasonal price trend at a glance.

Seasonal Chart of Signet Jewelers over the past 10 yearsSource: Seasonax

As you can see from the chart above, it is in fact September, and not October, that is the weakest month. The latter in fact runs sideways overall (although admittedly this is below average).

Conclusion

October’s bad reputation stems from particularly strong declines, which actually occur more frequently in October [and, while they affect individual days, they can also have an impact on the entire month.

Editor’s Note:  The original post by Dimitri Speck has been edited ([ ]) and abridged (…) above for the sake of clarity and brevity to ensure a fast and easy read.  The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article.  Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor. Also note that this complete paragraph must be included in any re-posting to avoid copyright infringement.

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