The October Seasonal trade will take place this year. It is a very simple trade: buy “the market” at the close of trading on October 27th, and sell out your position on the close of trading on November 2nd. There are adjustments for weekends, but neither of those dates falls on a weekend this year.
We track the trade back to 1978. For a number of years, it was nearly infallible, but then there began to be some losses. We noticed that if the market didn’t sell off at some point in October, then it was not very likely to rally at the end of the month. If one is looking for “fundamental” reasoning behind this trade, it goes something like this: there are typically very serious market declines during October, and institutions sell during those declines. However, by the end of the month, the Fiscal Year is ending for many mutual funds, and they don’t like to show a lot of cash on the books at year end, so they buy...