|
(11/19/11)
As I have mentioned before the Dow has never had a negative year
in the 3rd Year of a President's Term dating back to World War II. The Dow
closed at 11577.51 in 2010 so the Institutional Money will have to keep the Dow above
this level through the end of the year to keep the streak intact. Dow Performance in the 3rd Year of a
President's Term since 1943
| Year |
%
Return |
| 1943 |
13.82 |
| 1947 |
2.26 |
| 1951 |
14.36 |
| 1955 |
20.77 |
| 1959 |
16.40 |
| 1963 |
17.01 |
| 1967 |
15.20 |
| 1971 |
6.12 |
| 1975 |
38.33 |
| 1979 |
4.19 |
| 1983 |
15.78 |
| 1987 |
2.26 |
| 1991 |
20.32 |
| 1995 |
33.45 |
| 1999 |
25.22 |
| 2003 |
25.32 |
| 2007 |
6.43 |
| 2011 |
1.9% so far |
|
|
| Average |
16.3 |
Meanwhile looking at a weekly chart of the S&P 500 there was
a 5 Wave move down from the April high of 1371 which was followed by a 20% rally
in 4 weeks. At this point based on the weekly chart which gets rid
of the daily volatility there are two possible scenarios. The first
scenario is that a series of Zig Zags are evolving as a "WXY" pattern is
developing. The first Zig Zag ended at 1293 for "W" while the
current move down from 1293 is a Zig Zag as well for "X". If "X"
is occurring then it shouldn't drop below the 1184 level
next week which is the 50% Retrace from 1075 to 1293. Meanwhile once
"X" ends then another Zig Zag would follow for "Y" to
complete the pattern in the 1325 to 1350 range by early next year. 
Meanwhile the second scenario is
that the rally from 1075 to 1293 was a simple "abc" Zig Zag for Wave 2 of 5 which is
now being followed by the beginning of Wave 1 of 3 of 5. In this scenario
minor iii of 1 would drop down to 1158 which is the 61.8% Retrace from 1075 to
1293. Naturally if this scenario were to occur then we would see
additional weakness through the end of the year. 
Finally going back and looking at
all of the years in which it was the 3rd Year of a Presidential Term going back
to 1903 shows that the Dow has rarely had a significant sell off for the period
from Thanksgiving Week through the End of the Year as shown by the
table below. As you can see the only year there was a significant
drop was in 1931 in which the Dow lost 20.5% from Thanksgiving Week
through the End of the Year. In the rest of the years the Dow's worst
performance was in 1987 in which it lost 1.9% of its value. Thus
based on this research it appears there is a very low chance of the market being
significantly lower by the end of the year unless some type of world event
rattles the market.
Dow Performance Thanksgiving Week thru the End of the Year
(3rd Year of a Presidential Term)
| Year |
Return |
| 1903 |
11.1 |
| 1907 |
10.7 |
| 1911 |
0.1 |
| 1915 |
4.1 |
| 1919 |
-0.5 |
| 1923 |
3.7 |
| 1927 |
2.0 |
| 1931 |
-20.5 |
| 1935 |
-0.3 |
| 1939 |
-0.7 |
| 1943 |
0.6 |
| 1947 |
0.0 |
| 1951 |
0.7 |
| 1955 |
2.4 |
| 1959 |
1.4 |
| 1963 |
1.4 |
| 1967 |
0.6 |
| 1971 |
-0.5 |
| 1975 |
1.5 |
| 1979 |
0.1 |
| 1983 |
1.8 |
| 1987 |
-1.9 |
| 1991 |
0.2 |
| 1995 |
3.5 |
| 1999 |
2.0 |
| 2003 |
3.2 |
| 2007 |
0.9 |
|
|
| Average |
1.0% |
Amateur Investors
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