November Returns


by Steven Sarnoff

We welcome the onset of a new month with stocks seeking to extend their record run. Analysts often look to past returns for an idea of what to expect going forward. But the well-known disclaimer, “Past results are not indicative of future returns,” is always applicable. One of my favorite market adages is that, “It’s the little exceptions that get you.” So one is well-served to view historical returns with eyes open to alternative outcomes.

The following chart arrived in my Inbox, depicting monthly trends for the Dow Jones Industrial Average over the last 20, 50, and 100 years.


Chart by Bespoke Investment Group

You can see that Bespoke’s chart, highlighting the Dow’s average performance by month, shows that November has historically been a relatively positive month for the market.

However lovely returns may have been, with volatility (fear) utterly absent and investor optimism reaching record highs, my contrarian senses are tingling. On my daily candlestick chart below, you can see a potential “dark cloud” developing in today’s session. We shall see what it looks like at the close, but this negative character of the behavior of price movement portends ominous results for those who buy at this level. Also, you can see the recent surge higher tracing out a bearish rising wedge pattern. This indicates a likely break to the downside as price approaches the pattern’s apex. And on top of that, developing negative divergence between price and technical indicators reveal the venerable index may not be as healthy as it appears to many market participants.


Longtime Options Hotline subscribers know I view each day’s trading as a struggle between buyers and sellers for control of price direction.

Sarnoff’s bottom line: Approach the current market with caution, as stocks don’t move on a one-way street and sellers are setting up to strike back.

Wishing you good fortune in your trading.

Best regards,


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