The Best Month of the Year for Stocks

Financial media headlines are touting October as “The Best Month of the Year for Stocks!” Given it was 1 of only 2 months all year in which major indexes rose materially, not much to get excited about – especially considering stocks were neutral in 7 other months and plummeted in August. Last week closed with stocks declining, and among our stocks new weekly lows outnumbered new weekly highs again, a sign this second 3-week-old buying cycle may be abruptly running out of momentum. Oil-related stocks continue to sag, many at single-digit prices, as though oil is on its way to becoming a worthless commodity, which will correct at some point.

For us, a generally forgettable week, as abrupt price reversals signaled a return of the same institutional uncertainty that prevailed throughout the first 6 months of 2015. Our significant long and short gains are less numerous than usual, and offset by a larger-than-normal number of unproductive long and short holds, and more frequent trade exits for loss that dampen aggregate results. We are back to a very challenging market in which trends among many of our stocks are very short-lived, which both limits our gains and compels us to over-trade our account. Patience is a virtue here.

82% of the way through the year the major Indexes are mixed. DowJones30 is negative, S&P500 just above flat, and Nasdaq Composite slightly ahead, shaping up 2015 as the worst annual performance for stocks since the debacle of 2008.

A bit of perspective: although market conditions are causing our returns this year to be less than what we have become accustomed to in recent years, adherence to our trading strategy continues to produce net returns significantly higher than those of passive investors, even under these adverse conditions.

Highlights: only 4 new weekly highs. Double-digit long gains in CALL +30%, LUV +15%, MESG +23%, NOAH +15% and USMD +12%.

7 new weekly lows. Double-digit short gains in ADXS +17%, CARA +12%, MDXG +27% on large decline, NVIV +25% and XNCR +25%.

Stock list changes: A few deletions pending current trade exit. Adding Fluidigm Corp (FLDM) [scientific/tech instruments] with a past 10 month compound trading return of +152.0% and trade indicated.

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