1. Holiday season low trade volume because investors are having holidays with their families given their passive income from investments.
2. Sell in May (also partly attributable to the holiday season reason)
3. Holiday seasons generate very high sales numbers and make people very optimistic about the new year. Major market movers (i.e. popular gadgets, games, shopping, etc.) launch their new products/once-a-year-huge-discounts just-in-time for Christmas. The reports normally get reported in Jan-Feb the following year.
The sudden jolts can't be predicted:
1. SARS, influenza, Eloba, Zika, etc.
2. Flash crash due to technical glitches in trading algorithm, or China's circuit breaker that halts markets based on % swings.
3. Lehman brothers defaulting on their bonds (although people saw it coming, they believed that the bank was too big to fail)
Despite my constant answer to my friends that we can never predict the market, I decided to make an attempt to "predict" what the market will be like in the next 6 months (just for the fun of it).
Please don't take this too seriously as I will not be responsible for your missed opportunities. If the predictions turn out to be true, it could be mere coincidence or empirical evidence to support the hypothesis that there indeed are annual patterns in the market.
I extracted the historical monthly index from Yahoo and then did a month to month % comparison and average it over the 5, 10, 15 year spans. For e.g. 1 Jan vs. 1 Feb = 5% means STI was 5% higher on 1 Feb compared with 1 Jan. When plotted on a graph, it shows that 1 May sees the sharpest increase and 1 Sep sees the sharpest drop as compared with all other monthly comparisons. However, the index at 1 Sep could still be higher than the index on 1 Jan.
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| STI monthly difference |
So sell in May probably became a self-fulfilling prophecy.
