A Battle Between Seasonal and Overbought Patterns

Last week I covered how breakouts are generally not going anywhere.  Another problem I see is the lack of healthy pullbacks in weekly overbought/oversold indicators. The NASDAQ Composite is currently one of the strongest indexes. Its weekly Stochastics shows an overbought state lasting nearly a year. Looking at the Composite’s chart over the past decade or so, I see that while year-long overbought periods occur periodically, they usually last only about a year.

The markets may be only pausing right now, building strength for further upside. Seasonally, this is usually a strong period for the NASDAQ, suggesting institutions add to their portfolios regularly this time of year. The NASDAQ for instance has gained an average 6.1% over the next 13 weeks, with gains in 19 out of the past 23 years.

That is not surprising, as many companies’ strongest quarters are usually the last quarter of the year, terminating with their earnings announcements in late January.

So if the markets follow through with their seasonal tendencies, this market could log a few more months of gains. But sooner or later, that overbought situation will be resolved.

As a curious note, the other major indexes and index ETFs also have upwardly-biased seasonal patterns. But three standout as not having any track record of net movement this time of year…

Financials….

Semiconductors…

and Technology in general:

Going through individual stock charts, the pattern I’m noticing is that the basic industry stocks are, as a whole, doing the best. These are the companies that provide the basic products and services people consume on a regular basis, no matter what state the economy is in. People don’t always need a Tesla or the latest smartphone. They need the products made by Proctor & Gamble, Clorox, and Colgate, and sold by Costco and Dollar Tree.

Of course, there’s much more you need to know and many more stocks you can capitalize upon each and every day.  To find out more, type in www.markettamer.com/seasonal-forecaster

By Gregg Harris, MarketTamer Chief Technical Strategist

Copyright (C) 2013 Stock & Options Training LLC

Unless indicated otherwise, at the time of this writing, the author has no positions in any of the above-mentioned securities.

Gregg Harris is the Chief Technical Strategist at MarketTamer.com with extensive experience in the financial sector.

Gregg started out as an Engineer and brings a rigorous thinking to his financial research. Gregg’s passion for finance resulted in the creation of a real-time quote system and his work has been featured nationally in publications, such as the Investment Guide magazine.

As an avid researcher, Gregg concentrates on leveraging what institutional and big money players are doing to move the market and create seasonal trend patterns. Using custom research tools, Gregg identifies stocks that are optimal for stock and options traders to exploit these trends and find the tailwinds that can propel stocks to levels that are hidden to the average trader.

 

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