Dines on Seasonalities: August
by James Dines
The Dines Letter
Since
1961 there have been 21 higher Augusts, 16 lower, and one neutral. The downers
were in 1964, 1966, 1967, 1973, 1974, 1976, 1977, 1981, 1985, 1988, 1990,
1991, 1992, 1995, 1997 and 1998. The overall percentage is bullish at 55.3%.
Note that there have been three or four downers per decade but, so far,
in spite of the "Mother of All Bull Markets" decade, there have
already been six in the 1990s, so percentages dictate looking for an up
August this year, since it is the remainder of the decade. If this coming
August goes down, however, we might be witnessing the start of a reversal
of this Seasonality.
According
to Yale Hirsch's Stock Trader's Almanac (6 Deer Trail, Old Tappan,
NJ 07675), chance for market weakness is greatest in the latter part of
August. Interestingly, the three days before Labor Day, a long holiday weekend
that usually starts in the last two days of August, have been up 26 out
of the last 38 years for a 68% bullish record. Again as a cautionary note,
however, this record was up 17 years in a row from 1961 to 1977, but from
1978 to 1998, 12 out of 21 were downers. The same source further concludes
that August gets clobbered during bear markets, except when July gets clobbered
first.
Looking,
however, at August in tandem with July, those two months were an important
turning point in every single year from 1982 to 1991, and most recently,
last year, in most cases the high or low for the year. We would like to
give credit to Mr. Robert Prechter of the Elliiott Wave Theorist (P.O.
Box 1618, Gainesville, GA 30503) for having discovered this interesting
Seasonality, which nonetheless seems to have been muted since 1991 by the
persistent bull market of the 1990s. There were neither Tops nor Bottoms
registered in the summers of 91-97. Thus, something big might start when
this Seasonality finally does kick back in.
The
Dines Gold Stock Average (DIGSA) in the last 31 Augusts has risen 12 times
(39%), declined 16 times (52%), and was neutral 3 times. The Dines Silver
Stock Average (DISSA) has risen 15 and declined 15 times and was neutral
once. So, a slightly bearish bias is seen in gold, while silver is neutral.
Yet, careful research also reveals that gold shares' more important Bottoms
occurred in Nov 71, Aug 76, Jul 82, Jul 86, Sep 88, May 89, Jun 90, Nov
92, Sep 93, Dec 97, and in Aug 98mostly around the third or fourth quarters.
This indicates that gold stocks might be approaching another important bottom
in this third quarter.
Editor's
Note: James Dines is editor of
The Dines Letter, Box 22, Belvedere, CA 94920, 1 year, 20 issues,
$195. The Dines Letter is one of the very longest-surviving financial newsletters
in the world. Visit the Web site at www.dinesletter.com.
