Market Timing via Monthly and Holiday Patterns

 

A Free Lunch in the Stock Market 

The stock market displays a medley of patterns that can serve as the crux of a timing strategy. A showcase lies in the oft-seen surge of the market around the turn of the month as well as the run-up to a holiday.

As with all things, the timing strategy does have its shortcomings. An example involves the need to dart in and out of the market more than a dozen times a year in order to take full advantage of the patterns.

Another drawback stems from the higher rate of income tax on short-term profits as opposed to long-run gains in the stock market. The precise impact will of course depend on the specific circumstances such as the trader’s country of residence.

Despite of the hassles, though, trading with the calendar can deliver a higher payoff at less risk than the humdrum policy of buying stocks and holding them indefinitely. For this reason, a timing strategy based on monthly cycles and market holidays represents a free lunch on Wall Street.

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Market Cycles

 Causes and Effects of Waves 
 in the 
 Financial Forum and Real Economy 

A host of market cycles crop up in the financial forum as well as the real economy. In fact, the two domains of the virtual and tangible are interlinked in myriads of ways. As an example, the action in the stock market depends for the most part on events taking place in the external environment. In the opposite direction, the goings-on in the financial arena affect the vitality of the economy at large.

Looking at the big picture, the whole environment – made up of natural forces as well as human factors – plays a crucial role throughout the marketplace. A showcase lies in the impact of the weather on concrete goods as well as virtual assets. For instance, the onset of winter kindles the demand for heating, the prospect of which prods merchants in the commercial realm and traders in the futures market into bidding up the price of oil in advance.

In these ways a heap of cyclic themes show up everywhere, from stocks and bonds in the capital markets to crops and toys in the real economy. Moreover, the hardy motifs span the spectrum of time scales, from less than a month to more than a decade.

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