It sure seems as though nothing can stop this bull market.
A looming debt limit crisis, the threat of higher interest rates, hurricanes, and a nuclear-armed North Korea have had no effect. The stock market just keeps pressing higher. The S&P 500 posted a new all-time high yesterday by trading above 2508.
Today, though, investors are facing the one event that could finally derail the stock market…
It's the Jewish New Year.
There's an old adage on Wall Street that goes, “Sell on Rosh Hashanah and buy on Yom Kippur.” The saying highlights the seasonal weakness that typically occurs between those two Jewish holidays. It's similar to the “Sell in May and go away” maxim we hear every year.
No, stocks don't always decline during this time of year… But it happens often enough that there's a saying about it.
Tonight marks the start of Rosh Hashanah, the Jewish New Year. It also kicks off a 10-day period known as the Days of Awe. This is a period of intense reflection for people of Jewish faith, which ends on Yom Kippur (the Day of Atonement).
The adage originated many decades ago when it was common practice for Jewish investors to sell their stocks on Rosh Hashanah so they could concentrate on their prayers without the distraction of having to worry about the stock market. They would then buy back their positions after Yom Kippur – when they could concentrate on the stock market again.
Nowadays, any weakness in the stock market during this time is likely more a matter of coincidence than it is the result of millions of Jewish investors dumping their portfolio holdings. But stocks still tend to decline during this period.
Going all the way back to 1915, the Dow Jones Industrial Average has declined an average of 0.62% between Rosh Hashanah and Yom Kippur. That is statistically significant weakness for a 10-day period.
The declines have been much worse during periods of economic uncertainty – when the market was already struggling. For example, in 2008, the S&P 500 dropped 18% during the Days of Awe.
Of course, the market is certainly not struggling today. So, we’re probably not set up for a dramatic decline this year.
Besides, the market has shrugged off far more serious concerns than “seasonal weakness.”
Then again… stock market clichés exist for a reason. A few weeks ago it seemed that just about everyone was looking for a stock market correction of about 3-5%. If it's going to happen, it might very well happen during this seasonally weak time of the year.
Best regards and good trading,
P.S. Will you be following this market cliché during the Days of Awe? Or do you think this bull market is immune to the typical seasonal weakness?
Send me your thoughts – along with any other questions or suggestions – right here…
For today’s mailbag, Delta Report subscribers write in with their wins on a recent earnings trade…
Jeff, awesome play on Oracle. Made a tremendous amount on this earnings trade. Your system works for me. Many thanks and keep them going.
Jeff – longtime follower and proponent! Much success over the years, but your Earnings Algorithm… that looks to be something much more. Missed your initial ORCL suggestion yesterday – already out of reach by the time I read it… so I bought $53 puts a week further out. Sold today for over a 100% profit! Keep up the fabulous work!
Way to go on the Oracle puts! That and TEVA have been great for all of us. Interested to know the basics of your “Earnings Model” and how it informs your options strategy. Great job Jeff!
Hi Jeff, I'm certainly enjoying your service! Latest example was yesterday's trade of ORCL, which worked great for me. Got in at $1.57… then, this morning, only 18 hours later, got out with a 93% gain at $3.04! Not too shabby! The mobile app advisory really helps, as I don't sit in front of my computer all day – in spite of what my wife says! Keep up the great work!
Jeff, Thanks for the overnight ORCL trade. Got into it Thursday night for $1.55, out the following morning first thing (per your Thursday advice) at $2.65. Only 10 contracts, but $1100 – commissions overnight was fantastic. Keep them coming.
Thank you for the great Earnings Trade on Oracle last week. It was the easiest $2000 I've made overnight. I didn't bother looking back. I am neither good enough nor lucky enough to call highs or lows. It's hard to go broke taking a profit.
Great work on the ORCL. I got it at $1.52 but sold it too early at $2.25 due to travel on Friday morning. Well, still good profit for one day work. Keep more coming and glad that I follow you over from SR.
As well as some kind words from satisfied subscribers…
Thank you, sir, for your terrific service. I find your explanation and analysis of how you approach a trade to be some of the best tutoring of my trading career. Bravo!
Thank you for your great wisdom. It is much needed in this market.
Yes, excellent email this morning with the story of Lot. Great analogy – loved it! Also I've made that mistake in past years – hanging on or second-guessing and jumping back in on a position purely from a mindset of impulsivity and chaos. Needless to say, that produced a number of losses.
Since then I've learned the value of making fewer trades and keeping my mindset as much as possible in a state of peace. Anytime I get out of that and back in the direction of anxiety or hastiness, it most often leads to disaster. I've been focusing on the advice here which has increasingly paid off in this realm and elsewhere.