Halloween Trading Strategy Begins Next Week | Jeff Hirsch

Next week provides a special short-term seasonal opportunity, one of the most consistent of the year. The last 4 trading days of October and the first 3 trading days of November have a stellar record the last 30 years. From the tables below:

     S&P 500: Up 25 of last 30 years, average gain 1.96%, median gain 1.61%.
     NASDAQ: Up 25 of last 30 years, average gain 2.43%, median gain 2.29%.

     DJIA: Up 24 of last 30 years, average gain 1.95%, median gain 1.39%.
     Russell 2000: Up 23 of last 30 years, average gain 2.34%, median gain 2.56%.

Many refer to our "Best Six Months Tactical Seasonal Switching Strategy" as the "Halloween Indicator" or "Halloween Strategy" and of course “Sell in May”. These catch phrases highlight our discovery that was first published in 1986 in the 1987 Stock Trader’s Almanac that most of the market’s gains have been made from October 31 to April 30, while the market, on average, tends to go sideways to down from May through October.

Since issuing our Seasonal MACD Buy signal for DJIA, S&P 500, NASDAQ, and Russell 2000, on October 11, 2024, we have been moving into new long trades targeting seasonal strength in various sectors of the market via ETFs and a basket of new stock ideas. The above 7-day span is one specific period of strength during the “Best Months.” Plenty of time remains to take advantage of seasonal strength.

Quoted from:
Jeffrey A. Hirsch (October 24, 2024) - Halloween Trading Strategy Treat Begins Next Week. 

 

 Election-Year Octoberphobia — Jeff Hirsch, October 9, 2024. 

 

 November Performance in “All Years” (1930-2015) and “Election Years” (1932-2012) 

— Jeff Hirsch, November 15, 2016.

 November Market Performance (2001-2021) — Jeff Hirsch,  October 20, 2022.

 

October 28th has, on average since 1950, been the strongest day of the year.
 

 

 S&P 500 average Performance per Day & Day by Day Hit Rate (1928-2024).

 

S&P 500 Seasonal Pattern for Q4 of the Election Year 2024
- Presidential Cycle in line with the Decennial Cycle.
 

The Cycle Composite for 2024 combines the 1-year, 4-year, and 10-year cycles. 

Trends are more important than levels. —  Ned Davis Research, October 15, 2024.

 

 S&P 500 E-mini Futures (daily bars) and current 21-Trading Day Cycle ( ± 3 TD).

 

ooooOoooo

 

Goldman Sachs' technical strategist Scott Rubner indicates that US stocks are entering a favorable trading environment due to capital flow trends. He expects the quiet period for stock repurchases to end on October 25, with listed companies likely to engage in significant buybacks in November and December, estimated at $6 billion per day, accounting for 21.1% of annual buybacks.

As mutual funds, the largest sellers of US stocks, begin to withdraw before Halloween, this may positively impact stock prices. October marks the end of the fiscal year for most mutual funds, potentially leading to sell-offs of underperforming assets for tax reasons. Rubner noted that all 756 mutual funds, valued at $1.853 trillion, end their fiscal year on October 31, 2024. Historically, American households increase stock purchases in November, with capital inflows into mutual funds and ETFs peaking during this month.

 In Q4 2024, the NASDAQ may gain more than double what the S&P gains.

Looking ahead to the US election, Rubner suggests that post-election, market volatility may reset, benefiting various trading strategies. Additionally, strong non-farm payroll growth and shifting inflation expectations are becoming critical market factors, particularly regarding a potential Trump election victory, which may reignite trading interest.

By end of 2024, S&P far above 6,000 —  Scott Rubner, October 15, 2024.

 

See also:
Steve Miller (October 25, 2024) - S&P 500 Cycle Analysis - Time and Price Projections Update (video)

S&P 500 Weekly High Expected October 21-22 | Robert Miner

E-mini S&P 500 weekly high probable by next week, ideally around October 21-22 (Mon-Tue). Followed by a 2-3 week correction. And Election Year Fall to Year End net bullish trend.

Robert Miner — October 16, 2024. 

 

On Monday, October 14, the net percentage of S&P 500 members hitting 52-week highs reached the highest level (22%) since March. Forward returns for the S&P 500 have consistently been positive after strong readings in net new highs.

 

 Bespoke — October 16, 2024.

October 27: Key Date for the Year-End Rally | Wayne Whaley

We examined the S&P's performance during the first nine months of 2024. The index finished September with an impressive 20.8% increase, having only faced one losing month in April, which saw a decline of 4.2%. Notably, all seven rolling quarters during this period were positive, comprising the months from January to March, February to April, and so on. This remarkable performance places 2024 among only 15 years since 1930 that experienced both a gain of over 10% in the first nine months and no negative rolling quarter within that same timeframe. It's significant to note that all instances occurred after 1950.

A closer look at the historical data from the previous 14 cases reveals a pattern: while there tends to be some weakness in the second week of October, this is often followed by an "End of Year" rally starting around October 27. In fact, 13 out of the 14 instances recorded were positive from that date through the end of the year, with only a minor fractional loss occurring in 1964. Worth noting, four of the last five years have also seen positive performances during the period from October 7 to 15.

Wayne Whaley — October 6, 2024.

When the SPX is up through 3Q in an election year, 4Q is up 89% of the time 

w/avg return of 4.98% (4.26% median), which equates to SPX 6,000 into yearend.

See also:

 Jeffrey A. Hirsch (October 1, 2024) - October Volatility After Big Gain First Three Quarters.

S&P 500 seasonal pattern for October of the election year 2024 in line with the decennial cycle — September 29, 2024.

Stephen Suttmeier (July 1, 2024) - S&P 500 seasonality: first ten sessions and last ten sessions of the month since 1928.

Jack Gillen (2009) - Year-End Rally, January Influence & Trend for the Year.

Don't Panic in or out of a Market | Robert Miner

Beware of FOMO. Don't Panic in or out of a Market. Learn to identify probable market position, specific trade opportunities and trade management.

 

ES U24 - daily closes.

» A "daily" high is likely early next week, followed by a 4-5 day or so decline. «

 

ES U24 - weekly bars.

 » ES is likely to be mostly trendless for another week or two. When the two momentum cycles are 

aligned, a consistent trend will follow. The resolution is likely to eventually be to the upside. «

 Robert Miner @ X — September 14, 2024. 

 

» Don't Panic ! «

Robert Miner @ X — September 4, 2024.

 

See also:

Robert Miner (August 31, 2024) - S&P 500 Uptrend May Extend to 5,800 Into Equinox.  

S&P 500 Uptrend May Extend to 5,800 Into Equinox | Robert Miner

Daily S&P 500 data from the July high shows an an A-B-C correction into August 13. Since then, the S&P 500 has continued upward and sideways, reaching a new high last Friday, August 30. With daily momentum showing a bull reversal, the S&P 500 is expected to remain bullish for the next few days and likely exceed the July high within the next week or two. The daily closing level of 5,798 is a key benchmark to watch.

 

 

Key dates to monitor include the week ending September 20, which aligns with the next Fed announcement and the fall equinox on September 22. Historically, reversals often occur near the fall equinox. If the S&P 500 remains sideways or rises into this period, it could signal the completion of the current upward trend and the onset of a counter-trend move.

 

For the next three weeks, the S&P 500 should target the range of 5,689 to 5,783 based on weekly closing data. Monitoring this range is essential. A weekly close within this range by the week ending September 20 may indicate a potential weekly high. Weekly momentum indicators suggest that the S&P 500 is likely to continue its upward trend for another two to three weeks.

 

Reference:
Robert Miner (August 31, 2024) - S&P 500, Gold and Bitcoin Updates. (video)

 

See also:

Robert Miner (April 26, 2024) - The S&P 500 and the Election Year Cycle.

S&P 500 vs Tri-Annual, Yearly, Quarterly, Monthly, Weekly & Daily Pivot Levels

S&P 500 E-mini Futures (weekly candles) vs Tri-Annual Pivot Levels (for 2022-2024).

Based on spectrum analysis, Sergey Tarassov forcasted a multiyear high in US-stocks sometime 

around August 2024 between the crests of the 40 Month Cycle and the 42 Month Cycle. 

By then the tri-annual R1 level at 6,019 could well be reached. R2 is at 6,928.

 

S&P 500 E-mini Futures (weekly candles) vs Yearly Pivot Levels (for 2024).
Tri-Annual and Yearly Pivot Points and Levels are suitable for long-term investing or swing trading

with a time frame of several months to a year or more.

S&P 500 E-mini Futures (weekly candles) vs Quarterly Pivot Levels (for Q3 July-September 2024).
Quarterly Pivot Points and Levels are suitable for medium-term trading with a time frame of several 

weeks to a few months. They are useful for identifying intermediate support and resistance levels, 

trend continuations, and potential corrections.

.

S&P 500 E-mini Futures (daily candles) vs Monthly Pivot Levels (for (July 2024).
Monthly Pivot Points and Levels are ideal for short-term to medium-term trading 

with a time frame of several days to a few weeks.

S&P 500 E-mini Futures (daily candles) vs Weekly Pivot Levels (for July 07-12, 2024).
Weekly Pivot Points and Levels are suitable for short-term trading with a time frame of one to several

days to a week, to identify short-term support and resistance levels, trend continuations, and potential reversals.

S&P 500 E-mini Futures (4 hour candles) vs Daily Pivot Levels (for July 10, 2024).
Daily Pivot Points and Levels are ideal for short-term and intraday trading with a time frame of several hours to a day in order to identify short-term support and resistance levels, trend reversals, and potential breakouts. Daily Pivots can be used to make quick trading decisions, adjust stop-losses, or set price targets for the current trading session.

 

Pivot Points, Support and Resistance levels are calculated based on previous high, low, and close prices. These levels can identify areas, where price may bounce, reverse or break through, and where to set entry, stop-loss and take-profit orders. This technique is valid on various timeframes. Common types are Floor (Trader) Pivots a.k.a. Standard or Traditional Pivots (= all charts above), Central Pivot Range (CPR), Fibonacci, Woodie, Classic, Camarilla and DeMark Pivot Points, each type having their own calculation method.

 

Reference:
Franklin O. Ochoa Jr. (2010) - Secrets of a Pivot Boss.

See also:

Jeffrey A. Hirsch (July 10, 2024) - Soaring NASDAQ Approaching End of Midyear Rally.

Structural Characteristics of Bullish & Bearish Months | D'onte Goodridge

Traders want to find trending markets but often fail to see and understand the structural characteristics of bullish and bearish months. Both move in a similar fashion but inverse to one another. Here are the characteristics for the formation of a bullish month:

 

 

The first example is a daily chart of US Dollar versus Japanese Yen (USDJPY) during February 2023. The market was trending up. It was a bullish month. Let's identify the five key factors to a bullish month:

1. Price moves below the monthly opening price.
2. A swing low forms below the month's open.
3. Price purges a previous daily low (PDL) and reverses back to a previous daily high (PDH).
4. The market creates a market structure shift (MSS) to the upside and an Imbalance or Fair Value Gap (FVG).
5. Higher swing highs and higher swing lows form.

 

Looking at the daily candles in the USDJPY chart, we see the methodical sequence of a Bullish Month developing:
 

1. Price was movesg below the monthly opening price. Price stops below it, runs up, drops below it, runs up and continues the bullish trend.
2. A swing low below the month's open forms. This is a swing low because the candle on the left has a higher low and the candle on the right has a higher low, hence the low in the middle is the lowest point. To form a swing low  only takes three bars.
3. Price purges a previous low and works back to a previous high. The following day price reverses back to the previous daily high, all happening within a three bar setup, creating a swing low, which is a purge on the previous daily low and a reversal back to a previous daily high.
4. Next the market creates a shift to the upside with speed through a previous swing high and a FVG.
5. And price created a new swing high and a higher swing low.

The next example is a daily chart of Apple during January 2023. The same five criteria for a Bullish Month were met:

 

Now let's look at the five key factors to a Bearish Month:

1. Price moves above the monthly opening price.
2. A swing high forms above the month's open.
3. Price purges a previous daily high and reverses back to a previous daily low.
4. The market creates a shift to the downside and a FVG.
5. Lower swing highs and lower swing lows form.

 

The first example is a daily chart of British Pound versus US Dollar during August 2022. The market was trending down. Identify the above listed five criteria for the formation of a Bearish Month:

 

 

The last example is a daily chart of Gold during February 2023. Gold was in a down trend. Identify the structural criteria for the formation of a Bearish Month:

 

Reference:
D'onte Goodridge a.k.a. Forensic Forex (2023) - Characteristics of Bullish & Bearish Months. (video)  

 

 

 

See also:
Larry Williams (1998/2011) - Long-Term Secrets to Short-Term Trading, 2nd Edition.

 Michael J. Huddleston (2017) - ICT Weekly Range Profiles.

Daye (2023) - The Quarterly Theory.

 

The Taylor Trading Technique | Scott Hoffman

In my opinion, George Douglass Taylor was one of the greatest trading thinkers, and luckily he left behind one book on trading: 'The Taylor Trading Technique' (1950). This book lays out his 'Taylor Book Method' for swing trading in futures. Taylor postulated that the markets had patterns based on "market engineering" from the "powers that be" in the grain markets. These insiders would frequently cause prices to decline to set up a buying opportunity for themselves. Then, after the market rallied sufficiently to yield profit for these insiders, a short-term top was created to give them a selling opportunity. The market would sell off, and the cycle would start again. 

 

George Douglass Taylor was a grain trader in the 1940s and 1950s at the CBOT pit
and is credited original author of the 3 Day Cycle Short-Term Trading System.

The effect of this engineering was to amplify the natural rhythm of the market, creating false moves that would fool traders into buying when they should be selling, and vice versa. The thrust of the Taylor Technique is to identify this rhythm and take advantage of the "false moves". I have long maintained that if an individual could identify moves in the market that would serve to inflict the most pain on unwary traders then they would have a great trading system. I believe the Taylor Technique does that. Taylor created this method for the grain futures markets, but I find it equally applicable in the financial futures markets today. 

 

George Douglass Taylor’s system of short-term swing trading is based on the premise that the market moves in two to three day timeframes, moving from a low to a high and back to a low. The other important concepts are the importance of the previous day’s high and low, the length of upswings relative to downswings, and being a solely technical trader (ignoring fundamentals).

Cycle Day #1 – Buy Day

The first day of the cycle is the buying day. Look for a Buy Day two days after a swing high (the highest high of the past few days). On a Buy Day, look for the market to make its lows first, finding support around yesterday’s low. If the market opens flat to higher, look to buy the first sell off towards the previous low. If the market trades under yesterday’s low, be careful about going home long. The market should close higher than where it opened. If it is making new lows late in the day, it is usually best to exit. You can often get in the next day at a better price.

 

Cycle Day #1 - Buy Day

Two-Day Rate Of Change = ROC(2) 

Generally, it’s good rule of thumb not to buy late in the day on a buy day if the market is heading lower or closing lower than where it opened. Odds favor a lower opening the next day, giving you a better enter price. Likewise, if the market is going to close lower than it opened, don’t be afraid to liquidate your position. Odds are in your favor that you’ll be able to buy at a lower price the next day.

Cycle Day #2 – Sell Day

If you are long and the market is closing in your favor, carry your long position overnight. Odds favor a higher opening the next day setting up the Sell Day, the second day of the cycle. On the Sell Day you should look to sell into strength, liquidating your position, and going home flat. Often, the sell day trades on both sides in what I call a 'fade' day. A fade day often follows a trend day and can be traded from either side.

 Cycle Day #2 - Sell Day

Cycle Day #3 – Sell Short Day

The third day of the cycle is the Sell Short Day. The Sell Short Day is the mirror image of the buying day. On a sell short day, you should be looking to sell early morning resistance, looking for resistance around the previous day’s high. The market should not be making highs late in the day, if it is you should be able to get a better entry point the next day. On a Sell Short Day, the market should close lower than it opened. The Sell Short Day is often followed by a 'Fade' day.

 

Cycle Day #3 - Sell Short Day.

That is the gist of Taylor’s technique - a rhythm of buy-sell-sell short. I don’t always recognize where we are in Taylor’s cycle (you’re always learning!), but on days when it is clear, at the least it gives you a good indication of the market’s bias for that day. In swing trading, the relation of the open to the close should indicate the direction of the next morning’s opening. This helps you determine whether the odds favor being a buyer or a seller on a given day.

Reference:

Scott Hoffman (2012) - Insights of a Swing Trader. (videos)

Scott Hoffman (2003) - Swing Traders Users Guide.

George Douglass Taylor (1950) - The Taylor Trading Technique.

 

See also:

Cameron Benson (2024) - The Complete 3 Day Cycle Short-Term Trading System.

Larry Williams (1998) - Swing Points as Trend Change Indication. 

Linda Bradford Raschke & Laurence A. Connors (1996) - Street Smarts: High Probability Short-Term Trading Strategies.

The Complete 3 Day Cycle Short-Term Trading System | Cameron Benson

 

[...] Back in the 1950s George Douglass Taylor was a pit trader and he is the original author of the 3-Day Cycle. He watched the people trading larger capital and started to notice a rhythmic 1, 2, 3 to the markets. He used these rhythmic studies to develop the 3-Day Cycle Short-Term Trading System.

1. A Buy Day (Day 1) occurs after 1-5 Days of decline, when a market that has opened, made its low in the morning, and closed in the upper third of the days range.
2. Then follows the Sell Day (Day 2) which in fact (contrary to what its name suggests) rallies higher above Day 1 and one could already cover long positions on that day. However, if the 'Sell Day' has a strong close, a directional follow through could occur the next day (Day 3/1).
3. The Sell Short Day (Day 3) could come immediately following the Buy Day (Day 1), if price action presents in the opposite direction. However, after Day 1 the market could also move higher for 2-3 days before printing new highs in the morning, and close in the lower third of the days range. If you ever notice a market breaking out for 4, 5, 6, 7, 8 days in one direction, it's probably because it is breaking out of a larger structural pattern. [...] 
   

 » Once you see it, you can't unsee it. «

 

» The largest Aha moment I ever had when I started trading the 3 Day Cycle strategy was that the above three things can be traded completely different. It is massively important to your understanding of this style of trading:

(1.) 3 Day Setups using signal days (previous day's high and low, inside day, first green/red day).
(2.) Weekly Template.
(3.) 3 Day Cycle.

 

All three can also be mashed together into one big trading strategy that will present setups for parabolic trend trades, short squeeze, long squeeze, and some other setups that can help you get into the trade. « - Cameron Benson, 2023 

 

Reference:
Cameron Benson (June 15, 2024) - Ultimate Day Trading Guide (Setups and free 56 pages PDF Included)(video)

Cameron Benson (2023) - Stacey Burke Style Trading in a Nutshell.

Cameron Benson (2023) - Weekly Market Maker Templates Are MIND BLOWING. (video)

 Cameron Benson (2023) - The 3 Day Cycle.
Cameron Benson (2023) - The 3 Week Cycle.

 Cameron Benson (2023) - Trading the Pump & Dump Pattern.

Stacey Burke (2023) - The Three Day Cycle & Parabolic Trade Setups.

Stacey Burke (2022) - Best Trade Setups Playbook.

Linda Bradford Raschke (2001) - Swing Trading - Rules and Philosophy.

Daye (2024) - The Quarterly Theory.

Giovanni-1- (2024) - AMDX-XAMD.