October: Here We Go Again?

By Lawrence G. McMillan

Not every October is a bearish market (at least for a while), but many of them are.  Last year, there was an 80-point decline in $SPX from late September into the early part of October; and in 2012, there was a 120-point decline.  In 2011, there was plenty of bearish action, but it occurred in August and September, with the actual lows being made on October 1st.  In 2010, the market rallied through October.  

What all of these had in common was that there was a major market low made in October.  Even in disastrous Octobers, such as 1998, 2002, and 2008, there were strong rallies off the October lows.  So, the questions that one should be asking are: 1) should we bother riding the down market in October while it lasts, and 2) how can we identify the market bottom that is likely to occur in October.

One good guideline to remember is that “oversold does not mean buy.”  It is typical for October bearish markets so be volatile, thus their swift declines generate oversold conditions – but those usually occur well before the actual lows are in place.  In this article, we’ll examine how our systems can help guide you through the current market decline.

In last week’s Hotline update, we included a rather lengthy market commentary because so many interesting things were popping up suddenly.  That activity has continued this week, as the stock market has remained bearish and volatile...  

Read the full article (to be published on 10/10/14) and get all of the trading recommendations by subscribing to The Option Strategist Newsletter today. Introductory 3 month trial subscriptions are available for only $29.