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|Calendar Cycle: DJIA 1900-2006
All returns above represent compounded returns excluding dividends.
* These are not annual returns. They represent 6 month compounded DJIA returns.
● Virtually all net gains since 1950 occurred in the November through April period.
● Virtually no net gains since 1950 occurred in the May through October period.
Calendar Cycle and the Stock Market:
The Calendar Cycle has had a tremendous impact on the stock market for over a century! Virtually all of the gains
in the stock market are concentrated in six months of the year while the other six months have typically just broken
even. The spring and fall equinoxes mark the beginning of fall and spring respectively. Their correlation with the
market is substantial. The spring equinox this year was March 20th. The Fall Equinox will be on September 23rd
this year. Days and nights are of equal length on the date of either equinox. Daytime is shortest in the winter on
the day of the winter solstice ( Dec 21 or 22). The days lengthen until the summer solstice, the longest day of the
year (around June 22). Then the days shorten until the winter solstice.
The proposition that the seasons of the Calendar Cycle influence the stock market may challenge theories that
veteran investors have formed through years of observation. The evidence presented herein spans more than a
century. Please give the Calendar Cycle your earnest consideration. An objective seeker of knowledge will follow
the evidence... wherever it leads.
From 1950 through 2006, ALL of the stock market's annual gains are concentrated in November - April. The
average compounded return for the 57 November -April periods was 7.45%. The average compounded return for
the 57 May - October periods was .06%. Dividends were excluded.
From 1900 through 2006, 85% of the stock markets annual gains were concentrated in November - April. The
average compounded return for the 107 November -April periods was 4.25%. The average compounded return
for the 107 May - October periods was .75%. Dividends were excluded.
From 2001 through 2006 the calendar effect was very pronounced.
The correlation is too great, too consistent and continues over too long a period to dismiss as mere coincidence.
The century contained war and peace, booms and busts, crises and panics, discoveries and achievements. It
also saw the rise and fall of technologies, industries, empires and ideologies. Man's attention is drawn to those
readily visible events. We tend to attribute the rise and fall of the stock market to those visible and emotional
events which gain the attention of the media. To the contrary, much of the market's movement can be correlated
with unseen influences like the Calendar Cycle. The effect of the Calendar Cycle is not visible when viewing one
year at a time as it appears to make its mark steadily and without fanfare. Its effect is often masked by visible and
supposedly dominating forces which rise, fall and then are replaced by different and opposing forces. The effect
of the calendar on the market can only be observed when analyzing many years at a time. Some events are more
clearly seen from a distance. This is one such event. No attempt will be made to explain why the apparent
correlation between the calendar and the stock market exists. Political, commercial, biological and psychological
influences are some of the possibilities. If a cycle is present from the horse and buggy days through the atomic
age, one should consider the probability that the Calendar Cycle is not a temporary aberration but an intrinsic part
of equity cyclic behavior.
How do I use this information?
The Spring / Fall Equinox Cycle is one of many tools that may improve investors' skill in interpreting the action of
the markets. It provides evidence that market movements are not random... evidence that there are cyclic forces
pushing, then pulling the market... evidence for the timing of the market's next change of direction. However, it is
just one piece of a complex puzzle. It should not be used as a "stand alone" indicator.
Both severe and moderate downturns tend to occur during the May - October period. Be prepared to switch from
bullish to bearish positions.