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Art Cashin On The "October Syndrome" And Broken Seasonal Patterns
In a market where the Fed has assured that up is always and forever, or at least until such time as Primary Dealers can take down 99.9% of any given bond auction, down, it is no surprise that even monthly and seasonal patterns are completely inverted. The traditionally weak September market performance, has been flipped on its head in an attempt by all those involved to rescue the vast majority of underperforming hedge funds which would otherwise see an influx of redemption notices and terminations (ref: DE Shaw). So now that September is in the books, what does conventional knowledge tell us about October, so that in this Fed-induced bizarro world traders can come in and do the opposite. We look to Art Cashin for the answer.
The October Syndrome: Some Personal Historic Observations:
"The months of May and October have always broken hearts on Wall Street. In fact when I studied under the Moose Head (at Eberlins) it was a frequent subject. Prior to 1929 it was almost logical. We were an agrarian society and huge chunks of money shifted from city banks to country banks (and vice versa) at planting time and harvest time. The resulting temporary dislocations in bank assets caused spasms of tight money and down drafts in the stock market. But after 1929 it kept happening even though we had more smokestacks than haystacks. Additionally, the creation of the Federal Reserve in 1913 should have smoothed out any imbalances in money shifts. Anyway it makes the debate interesting."
This year we have to take seasonal patterns with a grain of salt that you would need a wheelbarrow to carry. The Rosh Hashanah seasonality didn’t work. The Autumnal Equinox seasonality didn’t work. And, we’re on the mark to close out the strongest September since 1939. Sometimes the groundhog strikes out.
In other words, good luck to everyone - your pockets are about to picked by the robots (again) no matter what. Stay nimble.
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I for one welcome our Robotic overlords.
Take the red pill, Neo.
From my blog at - http://thespiritoftruth.blogspot.com/2010/09/tis-season-for-some-folly.html
Financial panics during the autumn are fairly common due to the seasonality of our species' repeating, severe mass mood swings. As is widely recognized, the stock market has a tendency to fall during the Fall. In fact, thirteen of the twenty worst single-day percentage drops in the DJIA occurred between late-September and early-November, i.e., 65% of the twenty largest daily drops in the stock market occurred in a time interval that constitutes less than 14% of the annual calendar:
Dow Jones Industrial Average: Worst Single-Day Declines
(Dow Jones Industrial Average, percentage change)
Percentage
Date Decline
__________________________________________
October 19, 1987 -22.61%
October 28, 1929 -12.82%
October 29, 1929 -11.73%
November 6, 1929 -9.92%
December 18, 1899 -8.72%
August 12, 1932 -8.40%
March 14, 1907 -8.29%
October 26, 1987 -8.04%
October 15, 2008 -7.87%
July 21, 1933 -7.84%
October 18, 1937 -7.75%
December 1, 2008 -7.70%
October 9, 2008 -7.33%
February 1, 1917 -7.24%
October 27, 1997 -7.16%
October 5, 1932 -7.15%
September 17, 2001 -7.13%
September 24, 1931 -7.07%
July 20, 1933 -7.07%
September 29, 2008 -6.98%
More specifically, as discovered by market analyst Chris Carolan, the tendency is for panics to climax into around the 28th day of the 7th month on the annual lunar calendar, which is equivalent to Tishrei 26 on the lunar-based Hebrew calendar.
Note that during the autumn financial panic in 2008, when the current economic crisis kicked off, the implied volatility index, which is a gauge of overall fear on Wall Street, climaxed into the 28th day of the 7th lunar month.
This phenomenon can be more accurately ascertained by looking up the dates of key panic climaxes (including maximum DEFCON nuclear alerts in October of 1962 and 1973) using a lunar-based Hebrew calendar converter:
13 October 1857 = Panic of 1857 = 25th of Tishrei, 5618
24 September 1869 = Black Friday in 1869 = 19th of Tishrei, 5630
29 October 1929 = 1929 Stock Market Crash = 25th of Tishrei, 5690
26 October 1962 = Cuban Missile Crisis = 28th of Tishrei, 5723
Wed, 24 October 1973 = Yom Kippur Arab/Israeli War = 28th of Tishrei, 5734
Mon, 19 October 1987 = 1987 Black Monday Crash = 26th of Tishrei, 5748
Fri, 13 October 1989 = 1989 Friday the 13th Crash = 14th of Tishrei, 5750
Tue, 28 October 1997 = 1997 Asian Financial Crisis = 27th of Tishrei, 5758
Thu, 8 October 1998 = 1998 Russian-LTCM Financial Crisis = 18th of Tishrei, 5758
Fri, 24 October 2008 = 2008 Financial Crisis = 25th of Tishrei, 5769
As can be seen above, the tendency is for mass panics to climax in the second half of Tishrei and into Tishrei 25-28 specifically. Typically the acute phase of mass panic begins after the full moon in the 7th lunar month, i.e., around Tishrei 15.
What about this year?
The full moon occurs on September 23rd and Tishrei 25-28 will take place between October 3rd and October 6th. Thus, we are now about to enter the time of year most vulnerable to mass hysterias.
Iiiii get it [sadly]
Abortions for ALL ;)
It is comforting to know that I can, at least, pull the plugs on those computers without a charge of First Degree Murder.
"Just what do you think you are doing Dave?"
I've always liked Art
but until he comes out and says "ENOUGH OF THIS BULLSHIT MANIPULATION SOMEBODY NEEDS TO PUT A STOP TO IT", he is helping the criminals with his not saying it
As far as I know, he still likes to ridicule the idea that the PPT is engaged in the markets, though it's been a while since I've seen Joe Kernan give him the setup.
Until he comes clean on that, he is just another spinmeister.
+1
stay nimble? how about "stay away"?
/ES is still tradeable, but you have to be attentive and nimble. You have to be content with a conservative rule set.
Wonder what the market will be like a year from now.
Looking forward to the day the robots are gaming a dozen or so stocks and are trying to get in front of one another.....on the way down.
One large carry trade, half the move up in the market was driven by the 5% decline in the dollar over the month (gold up a little over 5% as well). The FED's POMO accounts for the remaining 4% increase within the S&P. You can throw seasonality out the window when you have a market primarily driven by currency fluctuations and your base currency fluctuating more than 5% in any given month.
You know when I was growing up I thought robots were the coolest things.....now not so much.
During his more "sober" moments, Art Cashin seems to imply that we're living during a time of very strange events. He can't venture too far from the company party line, thus you see and hear vague language being used on a dialy basis.
But when you review the big picture Art Cashin and his statements about systemic stress and distortions, Art seems to be saying we should all think seriously about marinating some ice cubes from a safe distance.
we should all think seriously about marinating some ice cubes from a safe distance"
CD... I love the Annie Dillard imagery .. but I am having a hard time getting my head around just what exactly it means!
But then, I begin to understand that I don't need to know exactly what it means.. just enjoy the thought!
Now it's my turn to have a difficult time getting my head around exactly what you mean. :>)
For those who don't know, the "marinating ice cubes" is a direct pull from a near daily phrase Cashin uses to describe what he does over the weekend. Meaning drink booze on the rocks, thus he's marinating ice cubes, a unique and funny way of saying drinking alcohol.
But I liked the Annie Dillard reference.
http://en.wikipedia.org/wiki/Annie_Dillard
"Marinating Ice Cubes" daily seems more appropriate these days.
Oh!.. I get it.. having a drink while relaxing at a comfortable distant from the expected disaster!
Actually, I am hoping to retain my front row seat constructed of multiples of longer term TZA call spreads, as I watch this "sucker go down".
Art is a very colorful character.. I used to listen to him on the Morning Call at one of my old employers, met him a couple of times at lunches sponsored by the firm. Very interesting fellow.
A variant of "sit back, grab the popcorn, and watch the movie - it has a doozy of an ending."
Personally, I'll take the drink.
Well, since we all know "how it works" why not make it work for us too, for a change, we'll see what we do when IT rolls over, for good and for a long time!?
Good luck with timing that! You're gonna need it.
Sure looks like they're working hard to keep the wheels on until the end of the month. I expect an almost flat close today, and then a POMO ramp back to try a breakout of 1150 again tomorrow. Thoughts?
Lots of Data coming tomorrow. We'll see how the data comes in, cant imagine too good with all the other stuff out the last month. I expect a miss in the PMI, jobless claims, and GDP to beat.
As i said on Friday, we are very close to a top, if not the top already, when David Tepper was on CNBC, that was the kiss of death.
We are slowing down big time, the market may swing short term, but we will be lower 3-6 months from now when it becomes obviously clear to market participants that we are headed for neagative GDP 4th quarter and on.
All the QE talk as well, that will do nothing, last QE didn't work, why would this one work. The inventory build is done, the final demand is not there, and things are slowing down big time. I excpet negative GDP 4th or 1st quarter 2011.
Since when has data meant a thing in this market?
Perhaps we'll see today at 3:50 when everyone on Geither's Fave 5 list gets a chance to preview tomorrow's numbers.
Sounds about right...
1155ish is as good a spot as any marking the 75% pomo pogo bounce off the lows and if we can hit it quick and roll lower it will leave a nice little diverged RSI signal too.
http://media.trb.com/media/photo/2009-04/85715.jpg
Buy every dip. It's the safest bet in town.
The only way IT will roll over is if Apple has bad earnings - will not happen.
What's a dip ?
Why do "we look to Art Cashin for the answer?" This guy has been bearish and wrong for 300 SPX points.
Love Art for 20 years but now he's shaking on air. Nervous or just getting on in years. He is a mouthpiece
he wrecks gin I believe. I could be wrong and wouldnt want to put that mark on him..but I think it's the gin.
Sitting here finishing my Panda Express, pondering whether I should buy or sell today, I opened my fortune cookie and it said, no kidding, "Fortune is on your side - play it for all it's worth."
Now, just for clarification, does that mean buy or sell?
The first stock broker I ever met declared "now is a great time to buy and sell stocks."
I said, do you buy now, or sell now?
He didn't like me much after that.
Go long on canned pork and beans and packaged macaroni an' cheese, it's a can't lose.
Actually, the correct answer is "Yes, But not right away!"
yoyo -- I am staying market neutral - long/short baby:
Short TAO (china homebuilder) and long CHIQ (china consumer ETF)
Also Short OIL and Long Royalty Trusts for PHAT dividends... MVO, BPT, PWE, WHX...
Between the damn 'bots, fed, and the politicans the whipsaw market is too dang tricky to call long or short (risk on/risk off, whatever) without hedges...
Uh, excuse me, but aren't the 'bots in the business of frying the hedges? Seems like you're voluntarily jumping into the spdrweb.
If the correlation to the 10yr UST holds true, which according to this it won't, then we should start to see retrenchment in the indices in the next week or two. Can we get to 1220 on the SPX before then?