October Effect - Bear Market Killer

What is the October Effect?

The October effect is the belief that the stock market tends to decline into the month.  This is a result of a number of crashes occurring in October such as, the Panic of 1907, 1929 Crash, 1987 Crash, and the 2008 credit crisis.

Bear Market Killer

October often receives a tough wrap based on the psychology of the fact October brings about significant drops.  In reality October is a bear market killer.  October has successfully ended eleven post World War II bear markets:  1946, 1957, 1960, 1966, 1974, 1987, 1990, 2001, and 2002.  October has actually been one of the best performing months leading months in the late 90s and early 2000.  October is also the last earnings season of the calendar year, so it has the ability to give the final push into the year end rally.  Investors should look at swift sell offs into October as the perfect time to buy the market instead of fearing it so.

October 2002 Bottom

Below is a chart example of the Dow Jones from the October 2002 bottom.  Notice how this bottom lead to a multi-year rally up to the 14,000 high in 2007.

October 2002 Bottom

Tim Ord
Ord Oracle

Tim Ord is a technical analyst and expert in the theories of chart analysis using price, volume, and a host of proprietary indicators as a guide...

Day Trading Simulator

Tradingsim.com provides the ability to simulate day trading 24 hours a day from anywhere in the world. TradingSim provides tick by tick data for...

Send this article to a friend.

Enter multiple addresses on separate lines or separate them with commas.