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What a stock market!  Just 29 days (11.5 percent of the year) of trading into the year and the S&P500 is already up 5.94 percent,  outperforming the Presidential Stock Cycle chart analog by 150 bps.  This market is not allowing anyone to get in and those who take profits end up buying back their stock 2 percent higher.

If you’re a buyer of this chart analog, the S&P500 is due for a rest and some sideways consolidation over the next month before making its next 6-7 percent move into May.   That is, unless, of course, the S&P500 and other developed country stock markets, along with certain commodities,  have become a global inflation hedge.   Stay tuned!

Category: Politics, Technical Analysis

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

14 Responses to “Tracking the Presidential Stock Cycle”

  1. jeff in indy says:

    would be interesting to see each first-term broken out and overlayed.

  2. carleric says:

    The Fed is working hard on their third mandate and guess what?….free and easy money creates an artificial floor under equties…wake me when its over….zzzzzz

  3. ben22 says:

    macroman,

    this is my opinion of course but the only phrase I have heard repeated this year more often than “don’t fight the fed” and “the trend is your friend” is that the third year of the presidential cycle is bullish.

    I remember well some tech analysts that I followed in 2007 that were hyping all the way into 2008 how the Decennial Pattern showed that for 100 years the 8th year of a decade tended to be the second strongest year on average. Many even laid out charts that showed the “typical movement” of stock prices in an 8th year that was also an election year. Here’s how one analyst discussed it in April 2008:

    “SPX: Long-term trend – Election years that fall in the 8th year of the Decennial pattern call for consolidation in the early part of the year followed by a strong finish. But the 6-yr cycle which is scheduled to bottom in late Summer/early Fall could also play a restraining role, followed by an eventual bull market top in 2009-2010. ”

    so I wonder, do you, or should one discount all the 3rd year of a presidential cycle talk considering how popular it has been? After all, cycles are not the dominant factor in markets, they constantly change and there are many cycles at work at all times/degrees of trend.

  4. Dow says:

    I feel like I’m in a Charlie Chaplin movie. The prat fall is coming – I just don’t know when it will hit.

  5. Pantmaker says:

    Wile E. Coyote going off a cliff…his predicted performance chart looked similar to this…more solid ground ahead…just didn’t work out for him.

  6. Pantmaker says:

    I still have that QID!

  7. Trevor says:

    OTOH, with so many people talking of an imminent correction, should we be thinking it’s a contrarian indicator?

    ;-)

  8. rip says:

    It makes no sense to try to draw comparisons between this cycle and all the ones before when the Fed was not printing money by the trillions.

    Kind of spells it out huh.

  9. Dow says:

    Trevor,
    I look at the chart and it’s ~SPLAT~ as far as the eye can see. I just can’t see how this fairy tale ends well.

  10. boveri says:

    22.8% return based on 1955-2003 average of the third year of the first term! I’m at a loss to understand why this has been so – what hard connection is there between two disparate objects of comparison that is a convincing reason to trust that a 22% return in 2011 would be average?
    The oft given reason that the administration purposely increases spending to assure re-election is nonsense I think.

  11. macrotrader603 says:

    markets will go where there are going to go…looking back at historical charts to predict the future is ridiculous because time doesn’t stand still…global economic/political conditions change so it doesn’t matter what happened before…

    predictions are futile, anyone who trades based on predictions is going to get blown out when it’s all done…if like DOW above you are predicting a decline soon, you may get run over fading this move

    it doesn’t matter what any of us think…all that matters is that you get on the right side of the market…

    i have read for the past few years people saying the move was done at 850…it will end when it ends but you’ve missed a 90% move so far…

    to say however, that because this is the 3rd year of a cycle, or second tuesday or whatever…past market performance has no bearing on today so keep your eyes open and throw out the predictions

  12. Max Jackson says:

    I thought we were going to have a correction back in November. My guess is now that everybody thinks the froth is reaching the edge of the cup, the cup will magically grow.

    Septemeber was supposed to be the worst. It was the best in years (if ever). This is not an ordinary recovery and much historic analysis is going to go screwy.

    However, considering how neck and neck politics and the Fed are these days, I’m guessing that this chart isn’t too far off, but there’s not a whole lot of foreseeable news that will scare. The market’s more unpredictable than ever at this point in time. It’s about as “partly cloudy” as it gets.

  13. worddonuno says:

    from 1955-2003, this includes bear and bull cycles. Would it be more accurate to include just the bear cycles, since we appear to be in one?

  14. cognos says:

    Yeah, just include the bear cycles.

    This all feels very bearish.