Hirsch, Stock Trader’s Almanac 2018

The Stock Trader’s Almanac is now in its fifty-first edition. It remains a must for traders who use seasonal factors to time the market.

The spiral bound, navy-covered almanac opens flat for easy access to its data or for jotting down notes. The format remains essentially the same as in previous years, with a calendar section, a directory of trading patterns and databank, and a strategy planning and record keeping section. The calendar section has on facing pages historical data on market performance (verso) and a week’s worth of calendar entries (recto). January’s verso pages, for example, give the month’s vital statistics, January’s first five days as an early warning system, the January barometer (which has had only nine significant errors in 67 years, including 2009, 2010, 2014, and 2016, so it may be losing some of its predictive power), and the January barometer in graphic form since 1950. Each trading day’s entry on the recto pages includes the probability, based on a 21-year lookback period, that the Dow, S&P, and Nasdaq will rise. Particularly favorable days (based on the performance of the S&P) are flagged with a bull icon; particularly unfavorable trading days get a bear icon. A witch icon appears on monthly option expiration days. At the bottom of each entry is an apt quotation. There’s about a five-square-inch space in which to write.

The Stock Trader’s Almanac pays particular attention to the presidential cycle, and the prospect for 2018 is mixed. “Midterm election years have been the second worst year of the four-year cycle, while eighth years of decades have been the second best, so 2018 promises to be laced with cross-currents.” On the negative side, “in the last 14 midterm election years, bear markets began or were in progress nine times.” But if the market sinks in 2018, it might provide an excellent buying opportunity because, ”from the midterm low to the pre-election year high, the Dow has gained nearly 50% on average since 1914.”

What other seasonals are powerful? The best six months strategy has a good track record. “Investing in the Dow Jones Industrial Average between November 1st and April 30th each year and then switching into fixed income for the other six months has produced reliable returns with reduced risk since 1950.”

The first trading day of the month is uncommonly strong (save in 2014). Beginning in 1997, the Dow gained a total of 6352 points in 238 first days, for an average daily point gain of 26.69. The other 4733 days gained 7232 points, only 1.53 on average.

This almanac is chock full of data that will delight those traders who believe that past is prologue. Even those who are skeptical have to pay attention to data that seasonal traders rely on and that therefore tend to move markets.