TDL's
Seasonalities:
October, the "Bear Killer"
by James Dines, editor, The Dines Letter
It
has taken us decades to think out some of the market's deepest
and most-elusive secrets, which culminated in the 37 Dinesisms
and other principles laid out in my third and final business
book Mass Psychology. We have also always highly
recommended MacKay's book Extraordinary Popular Delusions,
to be read alongside Mass Psychology, its modern version.
Some of our principles fly in the face of the so-called "consensus"
and "current wisdom." For example, MacKay's work, and
also Humphrey Neill's "Theory of Contrary Opinion,"
led us toward the "Dines Theory of Positive Negativism."
Specifically, TDL has been writing about the unusually frequent
declines in Octobers, a phenomenon of which the public first
really became aware of in the 1980s, but these days is widely
bruited on business TV. Yet, even now the Mass has it wrong:
declines end in Octobers, which is why TDL calls it "the
bear-killer month."
For the record, we
note that there is now not even the slightest public awareness
of Dinesism #29 (DINPIVOT) discussed in the Mass Psychology
book ("Whatever happens in October is usually reversed
or at least different in November.") The most important
"rule" in the stock market is that there are no
rules. However, there are guidelines, which is all that Dinesisms
are, playing percentages like any good poker player, better than
nothing in the trackless wilderness of hauntingly-lonely, stock-market
forecasting.
1. Stocks: Since
1961, Octobers have been bullish 61% of the time: 22 went higher,
14 finished down, and 3 ended neutral. Long ago we baptized Octobers
(beginning the fourth quarter of the calendar year) as "bear-killers."
The up months were very significant indeed. October has been
the turning point for twelve bear moves: 1946, 1957, 1960, 1962,
1966, 1974, 1982, 1990, 1992, 1997, 1998 and 1999 the only exception
was 1970. Accordingly, percentages favor markets ending any Correction
by the end of October. Our caution in August because the market
was getting "Overbought"; now it is getting "Oversold,"
so we are looking for a pre-election rally.
2. Precious Metals:
For the past 19 years, both the Dines Gold Stock Average
(DIGSA) and Dines Silver Stock Average (DISSA) have been bearish
in Octobers, 79% and 74% respectively. DIGSA was up 4 and down
15 years, while DISSA was up 5 and down 14. This is usually a
good time to buy on declines, before their seasonally bullish
first quarter, but in a Major bear market sometimes nothing works.
Editor's Note: James
Dines is editor of The Dines Letter, P.O. Box 22, Belvedere,
CA 94920, 1 year, 20 issues, 195. Published since 1960, The Dines
Letter is one of the most respected financial newsletters in
the world. Always on the "leading edge," The Dines
Letter's excitingly literate writing style is only matched by
its willingness to take definite positions, from "Buy"
to "Sell," and it includes many unique features. Visit
the Web site at www.dinesletter.com.
