Summary Points:
- Seasonality graphs predict a potential dip in the market for 2023.
- February historically shows negative returns, regardless of the political cycle.
- A potential turning point in mid-February to end of February may coincide with the current downdraft.
- The VIX, a measure of market volatility, is showing a similar seasonal pattern, suggesting a potential market decline.
- CPI days, which track the general market, have not experienced a significant downturn since the end of the bear market in 2022.
- Short-term weakness is expected until the end of the month.
The stock market rally may be facing some headwinds, according to recent analysis of seasonality graphs. These graphs, which
predict market outcomes, indicate a potential dip in the market for 2023. Jared Blicky, a market analyst, has been studying
the latest data and shares his insights on the potential turning point in the market.
Blicky highlights the historical trend of negative returns in February, regardless of the political cycle. Looking back to
1949, the fourth year of the presidential cycle, whether a Democrat is in office or not, February consistently shows negative
returns. This suggests that investors should exercise caution during this month.
To gain more granularity, Blicky introduces a model that produced good results in the past. The model indicates a largely
bullish trend from July to mid-year, coinciding with the market’s performance last year. However, Blicky points out a potential
downdraft from mid-February to the end of February, which aligns with the current market decline. This downdraft could be a
turning point and may reflect the predicted dip in the market.
Another indicator Blicky examines is the VIX, a measure of market volatility. The VIX shows a similar seasonal pattern from
mid-February to early March, suggesting a correlation between increasing VIX levels and market declines. With the VIX already
showing signs of heading higher, this further supports the notion of potential short-term weakness in the market.
Blicky concludes by presenting a map comparing the S&P 500 to CPI days. CPI days track the general market and have largely
aligned with market trends. However, a significant downturn on a CPI day has not occurred since the end of the bear market in
2022. This raises the question of whether we are potentially on the brink of a change. At the very least, some short-term
weakness is expected until the end of the month.
As investors navigate the market, it’s crucial to consider the historical trends, seasonality graphs, and indicators like the
VIX. While past performance is not indicative of future results, these insights can help inform investment decisions and
position portfolios for potential market movements.
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