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SP Futures Bias on First / Last Day of the Month

  • Today's Bias: Negative. There's little historical evidence to support a month end mark. In fact, the SP futures have not fared well on the final day of November. The index closed lower on that day in 8 of the last 10 years (63% since inception). In 2004, the performance on the last day of the month was mixed but the largest gain was just +.46% in August.
  • Tomorrow's Bias: Positive. In 2004, the first day of the month has performed quite well. Just 2 of the 11 months ended that day in the red (January and July). On the first day of December, the SP futures finished higher 59% of the time.

SP500 in December

The calendar may be Hoofy's biggest asset until year end. One year ago, we headed into the month of December with stocks near the highs and dollar near the lows (sound familiar?). And with similar overbought technicals, the SP forged ahead for an impressive 5% monthly gain.

The seasonals only serve to embolden Hoofy's plan. Minyan Michael Santoli highlighted some of the seasonals in his weekend column. Heck even the critters got in on the action (thanks Mike). But there's one in particular I want to highlight. In 11 of the last 30 years, the SP500 made a new high for the calendar year in the month of November (with '03 being the most recent). The index finished the month of December higher in 9 of the 11 by an average 3.01%.

Remember that past performance does not indicate future results. And these stats suggest the ending bias. The journey could be quite rocky. In the words of Dr. Marc Faber "we are never prepared for what we expect". And I apply that to both sides of the market.

Russell 2000

The smaller cap stocks continue to lead the market higher. Yesterday's intraday rally seemed to be led by the more than 1.5% intraday rise in the Russell. There's little reason to suspect December will be any different. I'd suspect the same leadership (or lack therof) will come from the smaller caps. If so, the chart below reveals potential resistance at the 639 level.

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No positions in stocks mentioned.

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