The stock market has fallen on the first three consecutive days in December. Traditionally, this is a very negative pattern. Moreover, several of the market internals that we monitor are showing patterns similar to the beginning of September 2011, when the market saw a roughly 7% correction.
Take a look at the annotated chart of the SPDR Dow Jones Industrial Average DIA linked below. The chart shows three consecutive down days. You may also notice from the chart that this phenomenon is not typical in 2013.
Please click here to see the annotated chart of DIA.
Among broad index-based ETFs, a similar pattern has shown up in SPDR S&P 500 SPY and iShares Russell 2000 IWM but not in PowerShares QQQ. The reason this is an ominous pattern is because new money comes into the stock market on the first day of the month from pension funds, 401K plans, and individuals investing on a monthly basis. This money is mostly invested during the first three days of the month giving the market a lift.
Further, in bull markets, like the one we are in now, historically the first three days of December have tended to be very strong. One of the reasons is that money managers whose performance has been lagging the indexes tend to invest aggressively to catch up as December starts…Read more at MarketWatch
