Monday, August 13, 2012

Dog Days of August

A note from a Quick Takes Pro subscriber got us talking about a theory I covered in Barron's on several occasions over the years. Most people think August is a throw away month - very quiet with light activity. After all, most of the world (sorry, Oz) is on summer holiday.

But just when you are not looking things happen. Peter Eliades, veteran technical analyst, looked at August over the years and found that many times it is the stage for a big market change. Sometimes the market reverses. Sometimes it accelerates the move in progress.

Granted, the past few years have not seen anything important happen in August (2009-today) and as usual we blame market meddling by central banks. But in 2008, the decline accelerated in August and in 2007 it provided the spike low on in the initial sub-prime crisis news.

We are not saying that we'll see anything important this year but it would be an ideal place to reverse the rally from last year's low and from the June 2012 low.

On a related note, the dearth of news is likely due to the summer holiday season in Europe. Yes, the hard workers in Euroland are taking their well deserved month off. (Side note - I have not taken a vacation since 2001 when I started my own business). 

Does anyone find this a bit out of touch with reality? The crumbling economies of (some of) Europe are happy to be sure productivity stays low this month.

Anyway, the lack of news from Europe is making it quiet here. As long as the bad news remains hidden, Ben won't print.

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