I hypothesize that there is a fulcrum in markets at six months from the lows. The idea comes to me from the well known fact (well known to divorce lawyers, at least) that hostility within couples reaches a maximum in February. I hypothesize that as the circular distance from February/from the low increases, the hostility recedes to harmony and back again and that a similar phenomenon occurs in markets. How to test?

Alan Millhone has some predictions:

A MIt is predicted holiday sales will be down this year, isn't it? Also I think many couples will stick it out for now as they can share one roof and different bedrooms! Also many are too financially strapped to file and pay for a divorce. I hypothesize a fall in the divorce rate. I have a couple who live together and have rented from me for ten years. Both draw SSI. She would like to get rid of him but he pays half the rent, so he is still there. This shopping season should be interesting. On another note I bought and moved a very large safe today from a customer of mine. My locksmith re-comboed it and said safes like this are scarce. Demand for safes will be strong, but I did not buy it for price appreciation — I have always liked safes!





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8 Comments so far

  1. Matt Johnson on September 10, 2009 7:47 pm

    "hostility within couples reaches a maximum in February" — is this study done in the northern or southern hemisphere? Winters sµck in the Northeast (US), which is why I moved to California. People spend too much time indoors. Maybe one way to test is by volume. I'm not an equity guy, but I'd bet volumes are higher in the winter months than in the summer months — then do the same study in a mkt in the southern hemisphere. Most traders don't deal with their emotions so they over trade (I'm reading Bacon's book and he calls it 'switching' — same as overtrading?) — overtrading leads to losses, which leads to taking it out on your spouse, and kicking the family dog.

  2. David on September 10, 2009 11:33 pm

    Dear Allan, I’ll take the other side of your prediction, one can get a divorces these days for 75 bucks, you see them advertised in the Green Sheets all the time. Actually the divorce rate is on the rise as noted by all the single dating web sites, surely you’ve been spammed by. As for lawyers,one is better off with a good criminal attorney, as there’s been nothing but crime in the market for years and had good old B.Madoff been in the banking business, he’d still be free as a bird scratching is rump trying to decide which pair of shoes to wear to the beach this day………..February, is this a leap year?

  3. anton johnson on September 11, 2009 11:16 am

    Below are daily StDev sorted by month for S&P Index 1985-Present. Fittingly, the model month for nuptials is most harmonious.

    J 16.43%
    F 17.18%
    M 19.47%
    A 16.58%
    M 14.80%
    J 14.52%
    J 17.65%
    A 25.32%
    S 21.86%
    O 24.42%
    N 21.27%
    D 17.74%

  4. anton johnson on September 11, 2009 12:51 pm

    Below is the monthly count of DJ Index 10/1928 - 2/2009 when the indicated month has the lowest low in the preceding and subsequent 6 month periods.

    J 30
    F 19
    M 29
    A 28
    M 23
    J 26
    J 25
    A 22
    S 31
    O 28
    N 22
    D 23

  5. vic niederhoffer on September 11, 2009 7:17 pm

    the perfect daily spec contribution by mr. a johnson as always, suggestive but not useful because of retrospection, as in all pivot work, looks to be a few standard errors away from randomness and supportive of the peak in divorce lawyer work, which of course coincides with Valentines's day. vic

  6. Admin001 on September 12, 2009 12:22 pm

    From Mr. Ken Drees:

    anton johnson's work depicted as line graphs

    [I made a] chart visual of Anton Johnson's work standard dev data for both S&P and DJI

    the S$P shows relative highs in the data for March and August– a 5 month cycle, the DJI shows a feb low to sept peak a 7 month course from low to high. And the feb low to relative august low, both seem interesting as the beginning and end months here precede outsized highs in the DJI data set.

    also of note in both sets, the decline from the relative data point series highs in late summer, fall back towards december year end mean. There seems to be trend opportunity here in terms of selling volatility at the right time in the fall and covering at year end. Should the adage be "sell fall fear, cover end of year"?

    Ken Drees

  7. Admin001 on September 12, 2009 1:00 pm

    Options expert Jason Thompson replies:

    Except you cannot sell fall fear for the winter but you can sell winter fear in the fall. Remember vol is not storable or transferable (think electricity) and is attached to the options or swap contract you purchase. If you were to examine constant contracts for the September and December SPX straddles you will find that adjusted for the time component Sep trades over, hence the markets prices at least partially already incorporate your findings and have for the last fifteen years.


  8. anton johnson on September 12, 2009 6:42 pm

    Another study along a similar theme, below are data when DJ Index 10/1928 - 9/2008 makes a monthly lowest-low of the preceding 6 months, AND is -10% or lower from the highest-high of the preceding 6 months (minimum magnitude for a “correction”). First column is number of months successive from an indicated low, second column are mean return for each month.

    Example: For the 6th month subsequent to an indicated low, historic mean return
    = -0.37%.

    Number of occurrences = 83
    Mean return for all months 10/1928 - 9/2008 = 0.52%

    0 -6.23%

    1 0.28%
    2 1.57%
    3 0.75%
    4 -0.39%
    5 -1.37%
    6 -0.37%
    7 0.40%
    8 0.90%
    9 0.49%
    10 0.22%
    11 0.88%
    12 -0.06%

    [Edited Sept. 13 12:09]


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