The Little Book of Stock Market Cycles: How to Take Advantage of Time-Proven Market Patterns

Chapter Ten

Spring Harvest

Reaping the Produce of the Best Six Months

Growing up in the Northeast, February was always the time when the big snowstorms hit and gave us a week off from school for winter recess and getaways to Florida. Those carefree days are long gone. I spend the early days of February parading the airways and media outlets with the results of the January Barometer and any adjustments to my annual forecast. Then it’s usually off to Traders Expo New York that kicks off on President’s Day.

Following solid gains in the best consecutive three-month span of November to January; markets usually take a breather in February. Depending upon the magnitude of January’s gains, the market often corrects or consolidates in February. Any weakness can be used to add to existing long positions or to establish new ones as the market tends to resume its rally at the end of February or the beginning of March and continues to run until the end of the Best Six Months in April.

Once April does arrive, it is time to begin looking for early signs of seasonal weakness, tightening stop losses, and preparing for the Worst Six Months of the year. As volume begins to fade, market fundamentals and technical indicators are likely to confirm it is time to take profits on positions sown back in autumn weakness.

But let’s start by looking at what good opportunities can be found in the first of the spring harvest months, February.

February Findings

January is a hard act to follow and the short, cold ...