Technical Market Report For Saturday, Dec. 26

SPX summary for the last four trading days of PY4 1928 - 2016

  • Averages --  0.13% 0.23% 0.51% 0.07% 0.94%
  • % Winners --   61% 52% 78% 52% 70%
  • MDD --  12/28/1937 3.55% -- 12/30/2005 1.61% -- 12/31/2009 1.12%

SPX summary for the last four trading days of all years 1928 - 2019

  • Averages -- 0.19% 0.27% 0.41% 0.17% 1.01%
  • % Winners --  63% 60% 69% 62% 73%

Year 1 of the Presidential Cycle

The Presidential Cycle is made up of four years which begin with the year the President is inaugurated.

I identify the cycle as the Presidential Cycle because I believe it is politically motivated. Prior to 1933, gold and silver were the medium of exchange and government had little control over money supply. Gold coins were removed from circulation by executive order in 1933 and the ability to redeem them was suspended.

Shortly after the confiscation of gold, the currency was devalued to $35 an ounce from $20 (a 40% tax). US citizens could not redeem their gold certificates for gold, but foreigners could until 1971 when Nixon closed the gold window, thus eliminating redeemability entirely and removing any intrinsic value from the currency.

With control of the currency, politicians are able to manipulate the money supply to their advantage. Assuming this hypothesis is correct, it is not surprising the Presidential Cycle has been changing over the past 80 years. In 2020, the US government created 25% of all of the money it has ever created.

On average, there are 21 trading days in a month. In the charts that follow, every month is defined as 21 trading days. If a month has more than 21 trading days, some of the days in the middle of the month are not counted. If there are less than 21 trading days, some of the days in the middle of the month are counted twice.

The charts below start with the shortest and most recent histories. The last chart is of the Dow Jones Industrial Average (DJIA), with data beginning in 1885. The first chart shows the Russell 2000 (R2K), with data beginning in 1979. The average of all years is shown in magenta while the average of the first year of the Presidential Cycle is shown in cyan.

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