ETF Investing In October: Bulls vs. Bears

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Jeff Hirsch of Stock Trader’s Almanac had a commentary in MarketWatch titled “Bear killer meets Presidential bull.”

It highlights the historical ups and downs that October is known for. While many rallies have started during this month, some of the greatest crashes such as in 1929, 1987, back-to-back massacres in 1978 and 1979 and on Friday the 13th back in 1989 occurred in October as well.

He has these interesting thoughts to offer:

October used to be a horrible month for stocks and from 1950-1997 held the record for most cumulative Dow Jones Industrials points lost. Since the beating the street took in 1997, it has since been the best month. All three major indexes have been up significantly with an average monthly gain of 3.1% for the Dow, 3.6% on the Standard & Poor’s 500 Index and a massive 5.1% for the Nasdaq Composite, which is why we advise that October is an especially good time to buy depressed high-tech stocks. The rising tide has indeed lifted all boats as only December and November are better for small-cap Russell 2000 stocks.

Although often brutish, it has become a turnaround month — a “bear killer” if you will. Eleven post-WWII bear markets have ended in October: 1946, 1957, 1960, 1962, 1966, 1974, 1987, 1990, 1998, 2001 and 2002. Seven were midterm bottoms.

He recommends a list of ETFs that have seasonally done well during this upcoming quarter. Don’t take that as a sure thing. I checked my data base, and some of the recommendations are showing decent momentum numbers while others are still very weak.

As always, if you decide to enter any new position, you need to establish your exit strategy at the same time. If you don’t, you are not investing, you are merely gambling.

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