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5 Historical Patterns Suggesting Bullish Momentum Will Continue in December

By Investing.com (Ismael De La Cruz)Market OverviewDec 04, 2023 03:57AM ET
www.investing.com/analysis/5-historical-patterns-suggesting-bullish-momentum-will-continue-in-december-200644093
5 Historical Patterns Suggesting Bullish Momentum Will Continue in December
By Investing.com (Ismael De La Cruz)   |  Dec 04, 2023 03:57AM ET
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  • Investor sentiment continues to rise and is increasingly outperforming its historical average (48.8% vs. 37.5%).
  • November was not only very good for the stock markets but also for the 60/40 portfolio.
  • In this piece, we will look at 5 bullish patterns that throughout history have rarely failed and are set to repeat as December kicks off.
  • Missed out on Black Friday? Secure your up to 60% discount on InvestingPro subscriptions with our extended Cyber Monday sale.

November 2023 was a remarkable month for capital markets around the world. Here's a snapshot of the notable performances across various asset classes:

  • S&P 500: The S&P 500 experienced a robust month, rising +9.5%. This performance stands as its second-best November since 1980, trailing only the extraordinary rally driven by the pandemic in 2020. Almost all sectors, except energy, contributed to the positive trend. Technology stocks notably led the gains, posting an impressive +12.7%.
  • Dow Jones Industrial Average: November witnessed the second-highest monthly close in the history of the Dow Jones. The total return for the month reached a new high, showcasing a remarkable +181% increase over the last decade, equivalent to an annualized growth rate of +10.9%.
  • Nasdaq 100: The Nasdaq 100 surged +11% in November, demonstrating resilience by not experiencing a single decline of 1% or more throughout the month.
  • Russell 1000: The Russell 1000 posted a substantial gain of +9.77% for the month. Within this index, 38 stocks saw increases of more than +30%, with 14 rising over +40%, and seven climbing more than +50%. Notable performers included Affirm with an impressive +95.4% gain, followed by Roku (NASDAQ:ROKU) (+74.92%), Coinbase (NASDAQ:COIN) (+61.62%), Block Inc (NYSE:SQ) (+57.60%), Gap Inc (NYSE:GPS) (+56.8%), and Expedia (NASDAQ:EXPE) (+42.9%).
  • U.S. Bond Market: The U.S. bond market saw a significant uptick, gaining +4.5% in November. This marks the eighth-largest monthly advance since 1976 and stands as the best month since May 1985.
  • US 60/40 Portfolio: The US 60/40 portfolio experienced a robust +7.3% gain in November, making it the second-best month in the last 30 years (following April 2020) and the ninth-best month since 1976.

Looking ahead to December, the Federal Reserve is expected to keep the interest rate stable on December 13, with expectations of a subsequent rate cut in May. Market sentiments have already factored in this likelihood, making Powell's subsequent statements crucial.

As a bullish November concludes for markets, let's take a look at 5 patterns that are set to play out, potentially leading to a consecutive bullish month in the form of December.

Historical patterns often provide valuable insights, having proven effective over numerous years. While they don't guarantee accuracy, these patterns, developed through extensive historical observation, are worth watching out for.

1. S&P 500 Performance Post +8% Gain

Since 1950, when the S&P 500 records a monthly gain exceeding +8%, the subsequent months tend to be positive. The averages are intriguing:

  • 1 month later: +1%
  • 3 months later: +3%
  • 6 months later: +6.1%
  • 9 months later: +9.2%
  • 1 year later: +12.5%

2. Positive November Post Three Consecutive Down Months

Following a three-month decline in August, September, and October, historical patterns indicate a robust performance in November, typically averaging +3.7%. In the current instance, this pattern has not only held but has nearly tripled those anticipated gains.

Following this pattern, December tends to rise an average of +0.8%-1%, with an average increase of +4.5% in the first two months of the following year (2024).

3. December Performance

Since 1926, December has yielded positive returns for the S&P 500 78% of the time, with an average return of +1.6%. Notably, the stronger gains typically occur in the last third of the month, particularly in years preceding elections. Additionally, mid-December tends to mark the point where small-cap stocks outperform larger counterparts.

4. Santa Claus Rally

Officially, the Santa Claus rally spans the last 5 business days of the year and the first 2 business days of the following year, totaling 7 days. Historically, this period has shown favorability for stock markets, outperforming all other 7-day spans throughout the year with a return exceeding +1.33%.

5. Weeks Surrounding Christmas

Post-World War II, the week preceding Christmas sees an average return of +0.5% for the S&P 500, and during the week following Christmas, an average return of +0.7%.

While past performance doesn't guarantee future results, these historical patterns offer valuable insights for investors navigating the markets.

***

You can easily determine whether a company is suitable for your risk profile by conducting a detailed fundamental analysis on InvestingPro according to your own criteria. This way, you will get highly professional help in shaping your portfolio.

In addition, you can sign up for InvestingPro, one of the most comprehensive platforms in the market for portfolio management and fundamental analysis, much cheaper with the biggest discount of the year (up to 60%), by taking advantage of our extended Cyber Monday deal.

Disclaimer: This article is written for informational purposes only; it does not constitute a solicitation, offer, advice, or recommendation to invest as such it is not intended to incentivize the purchase of assets in any way. I would like to remind you that any type of asset, is evaluated from multiple points of view and is highly risky and therefore, any investment decision and the associated risk remains with the investor.

5 Historical Patterns Suggesting Bullish Momentum Will Continue in December
 

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5 Historical Patterns Suggesting Bullish Momentum Will Continue in December

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Comments (5)
MalikRafu Malik
MalikRafu Malik Dec 07, 2023 7:19AM ET
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Randall Paul
Randall Paul Dec 04, 2023 11:39PM ET
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good article
Drr Terry
Drr Terry Dec 04, 2023 12:38PM ET
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While I certainly appreciate technical analysis and market history, markets right now are running on liquidity. Period, Full-Stop!!! Everything else you hear or read is really secondary at this point. And I say that because Central Banks pumped $350 billion into the markets last month which (along with falling rates) set off the face-ripper rally that we saw (and one of the strongest November's on record). So, only way melt-up continues is if Banks keep pumping in the liquidity. If you believe they will then go ahead and keep buying. But, it you believe they're instead going to take the foot off the accelerator and pause some here then look for markets to head down and all for all of the technical and historical patterns discussed in this article to prove meaningless.
jackQ Bear
jackQ Bear Dec 04, 2023 12:38PM ET
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well said
Mehir Lashar
Mehir Lashar Dec 04, 2023 12:15PM ET
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03263528749
Ismacil Ibrahim
Ismacil Ibrahim Dec 04, 2023 3:59AM ET
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Wajdi Rezeq
Wajdi Rezeq Dec 04, 2023 3:59AM ET
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