Hi, this is Steve Eisman and this is another episode of the Real Eisman Playbook, and today we're going to interview Jeffrey Hirsch, who is the author of the Stock Trader's Almanac. This is going to be a fun interview. The Stock Trader's Almanac is about patterns, charts, graphs, and we're going to go through a whole bunch of different charts and graphs and talk about the patterns of the way people trade on a monthly basis, daily basis, annual basis, and I think you'll find this interview a lot of fun. And at the end, I'll come back to talk about lessons learned.
Hi, this is Steve Eisman and welcome to another episode of The Real Eisman Playbook. You know, sometimes I think about how to categorize the guests that we have on our show. There's one way to categorize it would be two types of guests: time-specific and not time-specific. So, we often have guests, stock analysts, talking about what's going on in earnings season. We have guests talking about what's going on politically. We had a guest a few weeks ago talking about what's going on in the war. That's time-specific. But then we have often authors of books where it wouldn't matter what time of year we would show this interview because it would be good at any time. And today is one of those interviews. Today my guest is Jeffrey Hirsch, who is the author of the annual book Stock Trader's Almanac. Here's my copy, the 2026 version. Jeffrey, welcome to The Real Eisman Playbook.
Great to be with you, Steve.
So, give us a little history of this book. And then we'll move on from there.
Sure. Well, my illustrious father, who Steve Forbes called a legend, was the man who started the book back in 1966, the year I was born. He had been working at a place called Indicator Digest. It was a newsletter analyst shop out of Palisades Park, New Jersey. It was sort of a proving grounds for analysts and writers. And he had started working there with his cousin, my uncle Sam, who was a songwriter, wrote 'Cocktails for Two' and 'My Old Flame,' and had sold his publishing company to RCA years ago. Stock dropped, you know, he got stock for his publishing company. So he became a student of the market, and then he ran an old A-B split ad back in 1961 in Barron's, two different headlines, and the ad hit. And he calls up my father, who was working in the music industry, and says, 'Yale, I want you to come in and run operations.'
Your father's name was Yale?
Great name. He was a songwriter, and at one point I had...
Your father was a songwriter too.
Composer, piano player. A lot of music in my house. You know, I turned him on to some rock and roll over the years, but he was very open, turned me on to a lot of music. But so he came in, and I think honestly, I think the music is part of the pattern recognition and the understanding of the rhythm of the...
Music and math have a tremendous relationship.
Tremendous. And he was a very large individual, he could turn a phrase. I mean, some of the famous phrases of his: 'If Santa Claus should fail to call, bears may come to Broad and Wall.' This is all Yale's songwriting ability. He could write a headline as well and ad copy. But in '61, he starts working with Sam Coslow, you know, my godfather. And after a few years there, he wants to take all these indicators and market patterns and stuff and put them all together in a calendar format so that he can follow the market schedule along with his own. He goes out on his own. My mom's pregnant with me. You know, I'm in utero there. And he starts his own business in '66. Stock Trader's Almanac spends the next 18 months building it, puts out the '68 edition in the fall of '67, and it hits, and everyone on Wall Street dug it. It's going to be 60 years old. The 60th edition is coming out for '27. So, must be doing something right. It seems to continue to resonate with people, and it's basically, you know, watching how the market schedule correlates with the year, the season. I mean, it's the institutional quarterly patterns, the daily patterns. I mean, it's one of the first...
What's the premise? This book has a... it's not the longest book in the world. I mean, it's not even 200 pages long. It's filled with numbers and graphs. I mean, it's a very information-rich book, but I felt as I was reading it that there is an underlying premise of this book. What's the underlying premise?
It's giving yourself the calendar edge. I mean, it's tracking... it's the real behavioral finance book. This is how people behave on a regular basis, how institutions behave on a regular basis on a daily pattern, weekly pattern, monthly pattern, annual pattern, quarterly pattern, four-year cycle, presidential cycle pattern. So, it's focusing on repetitive human behavior. As humans, we are creatures of habit. We do things repeatedly, habitually with our money, just like we do with, you know, getting up every day around the same time, having our week the same time, we pay our bills the same time, we go on vacation the same time of year. There's, you know, triple witching, there's holidays. I mean, we've got right here, we got the Passover-Easter holiday. This has a certain seasonal behavior to it as well. I mean, it's spring, so things happen during the... you know, summer doldrums. You have the... there's more daylight in the Northern Hemisphere. People are doing other things away from the trading desks. They're out playing golf and going on vacations, and the kids are home from school. So, there's a general flow to what people do. Granted, there are exogenous events, current events in the Middle East, you know, perfect example. But generally...
Well, your book did not predict the war in Iran.
No, but again, nobody else did either, right? Somebody asked me on my members webinar yesterday, what black swan events do you foresee? I chuckled, like, that's what a black swan is. The things you don't foresee.
If you knew, you wouldn't have to write this book.
So, let's start with... let's work through a bunch of different patterns that are in this book, which are... let's... we'll go through some of the more important ones. So, at the beginning of the book, you talk about a midterm election pattern. And as everybody knows, there's a midterm election in November. What will happen? We have no idea because at the rate things are going, the world will flip 15 different ways between now and November. So, making a prediction about the midterm election is ridiculous. But you have a bunch of stuff in here about a midterm election pattern.
Yeah, we'll talk about that. Another one of Yale's phrases that he called the midterm year the bottom picker's paradise. In the last 19 cycles, it's like 11 of the last 16 bear markets bottomed in the midterm year. This is a time when, you know, incumbent presidents generally lose House seats, their party generally loses seats. It's very historically common. We see the weakest period, what we call the weak spot of the four-year cycle, is Q2, Q3 of the midterm year. This is where the campaigning heats up and, you know, starts to take attention away from the market and the economy, and the market tends to go sideways and chop. It's right in there with our, you know, worst six months of the year as well. But then you see the best year of the four-year cycle has been the pre-election year. So you've got this bottom, you know, tendency. We had a nice textbook October midterm year bottom in 2022. We have a page in the book that shows all these different things that happened in the midterm year, and I've highlighted all these conflicts. I mean, Russia invades Ukraine. We had, you know, 2018, there was issues with the Fed. There's things that happen in the midterm year as the political arena is changing. It tends to leave the market and the economy vulnerable to different things happening out there. So, we've got this midterm, you know, bottom-picking situation tendency. The gain from the midterm low to the pre-election year high is 46.3% for the Dow on average going back to 1914.
And when does it bottom? I mean, right now we're as choppy as choppy can be.
It's usually Q2, Q3, latter part, you know...
Late summer. We see a bunch in October. There's a few March ones in there that I noticed recently. The NASDAQ move from the low to the high is 66.6%.
So, you're talking about... let's imagine that the end of the choppiness bottom is September 1. So, from September 1 until the next election, you're saying the market, the Dow on average goes up 46%...
The annual high during the pre-election year.
The annual high from the bottom...
From the bottom in the midterm year 2026 to the high in 2027, the pre-... whenever that may be.
And on that table in the book, you can see that so amazingly, a lot of the biggest cluster of those new highs occur in December, December and very close to the last trading day of the year for the pre-election year. But the sweet spot of the four-year cycle is Q4 midterm year to Q2 pre-election year. Three quarters in a row where you see...
Q4 midterm year to Q2 election year or pre-election?
So that would be basically from November, December of this year till June of next year.
September 30th to June 30th.
Of next year.
Sweet spot. 19% Dow, 20% S&P, 29.3 NASDAQ average over...
The number sticks in the head.
I see these numbers.
I'm with you. When you get that number, you know, I had a friend in law school who created this gimmick where when he would oral argue, he would memorize a footnote from a case. And so when he would argue in front of the judges, he would say, 'And as in the footnote on page 22 of this certain case, it says...' And he said it always worked because the judges would always be so impressed that he would quote this. But that's like 29.3.
Like Good Will Hunting, you know, whatever. He goes through that whole thing.
Right. Exactly. Let's talk about... I mean, what you have in this book is certain patterns during the year. Give me the top three or four most interesting, most important patterns that you think recur and recur and recur and recur.
The most important one is the best six months. What my father called the best six months switching strategy. It was introduced in the 1987 Almanac in 1986. Basically, you know, it's the flip side of, you know, sell in May and go away.
By the way, do you believe in sell in May and go away?
No. I mean, I don't disbelieve in it. We don't go away. We take some profits, reposition. So, we are the 'buy in October and get your portfolio sober.' That's what I came up with on the flip side of that. Instead of sell in May and go, you can't sell in May and go away if you didn't buy in October, right? So, this is the end of the best six months here in April, you know, November to April for the Dow. NASDAQ goes to June, it's the best eight months. We start to transition and reposition. We tighten up stocks, limit new longs, get a little defensive. We don't go away. We sell losers, underperformers. We start to reposition in that. By the way, not enough people do that. They don't sell their losers. They stick with them.
Gerald Loeb. I get gooseflesh thinking about all the things my father taught me, you know, and The Battle for Investment Survival. I'm sure you know Loeb. It's in the back of the Almanac. I don't know if you got to that part. Some of the reminders, you know, it's like the most important thing is go against your instincts. You know, sell your losers short or fast and let your winners ride. I mean, we do like to sell half on a double or if you're up a bunch, take some profits. We have different strategies for different positions, but the granddaddy of all the seasonal patterns is the best six-month switching strategy.
The raw version is you're buying, you know, Dow, S&P, NASDAQ on October 30th and 31st or the last trading day of the month and selling April 30th...
Of the following year. We use a MACD technical timing indicator to...
MACD is, again, another Jerry... invented by Gerald Appel, the late Gerald Appel, which is moving average convergence divergence. It takes a couple of exponential moving averages and it's a momentum shifting indicator. So, it's pretty common in technical analysis.
Not my strong suit, by the way. You should know that.
I gathered. But, you know, the thing that Gerald Appel, who I knew as a kid, wrote when he created this MACD indicator was it's not something you use in a vacuum. You don't use it by itself. You use it in conjunction with another reason to buy or sell something. For us, it's seasonality. For you, it could be, you know, a fundamental analysis of a stock or a sector or something. You use the MACD to sort of confirm an entry or exit.
So that improves the best six months.
So it's showing that there's momentum in a stock or...
Or the breakdown of momentum.
Okay. Oh, the breakdown of momentum. So, you know, we could get wonky and technical on that. I don't know if we want to do that. But the thing that we did back in 2008, there's a gentleman named David Aronson, technical analyst guy with Baruch College and the CMT, you know, the market technicians. He wrote a book called Evidence-Based Technical Analysis. He took 6,200 and change different black-box systems and ran them through the scientific method, trying to disprove the null hypothesis that all of these black-box systems had no predictive power and were all the result of chance. They all failed.
They all failed his test. In other words, they were not predictive.
Correct.
Okay. When we picked that book back when my father was alive, I think it was '08 if memory serves, as our best investment book for the Almanac, we asked him to take the best six-month switching strategy and put it through the same paces. He took it starting in '87 because that was the first full year after we came out with it, so it wasn't back-tested. And, you know, long story short, lo and behold, unlike any of the other 6,000-plus different black-box systems, it was the only one that had predictive power and was not the result of chance.
Okay. So basically you want to buy stocks in October and sell them in April.
September, October, April, May, start tightening up. I mean, it's...
By the way, I'm going to accept that this is true.
Has to be true. It's in the book. Why is it true? That's my question. That's sort of like, okay, people have patterns, but this is not intuitive at all that you should buy stocks in September and sell them in April, and yet it recurs and recurs and recurs. Why does it recur? I mean, maybe you don't know and it just does, and that's just the way it is, or I'm sure you've given this some thought.
Of course. I mean, we've been asked the question for years, and there's some data points there. Number one, coming from your history as a fund manager, institutional person, there is that mutual fund deadline, the 40 Act deadline of October 31st.
Right, where the firms, they have to reconcile the 10 months accounting with the previous year's 10 months, but the full year accounting so that they can have everything settled for distributions at the end of the year, October 31st. This creates sort of a vortex of action where institutions have to move some money around and do some things. So, that's a big part of it. Most of these patterns are... and there's another one I want to tell you about in a second because it's about how institutionals drive these patterns, what they do on a quarterly basis and a regular basis. So, you've got the end of the third quarter window dressing, September, historic. That's where things start to sell off. You see that weakness, the worst month of the year.
Well, you have... so institutions will sell. But this is part of the business...
You're going to prove my point.
You know, this is part of the business that shouldn't be and yet is. Let's say an institution has a stock that's down 50%. It's an embarrassment. Maybe they should own it. You know, maybe it's a great time to add to the stock, but they sell it because they don't want their investors to know that they ever owned it. So therefore, when they report and it's not there, it's like it never existed. And so they sell the stock down, let's say, 50%, out of basically, for lack of a better term, embarrassment, when maybe, you know, if they weren't worried about what their investors thought, they should be doubling down. I mean, that could be the best thing to do, but they don't because of the publicity.
This is what creates the best six months and these seasonal patterns. Exactly what you're saying. This is what we... it's in there. I mean, this is window dressing, right? This is portfolio restructuring at the end of the quarter. They do it at the end of every quarter, but it really...
It's very strong at the end of October.
And in September and October. That's where we get that period of time. And then you have them trying to make their numbers for year end. So they're trying to make it look, bump it up for the end of the fourth quarter. So you got all this money coming in, money following money, gains beget gains. You have people coming into the market. You have this... now then you flip over to the retail side of things where you have this general, you know, holiday spirit that comes in and people are getting money from bonuses and end-of-year things and it goes into the market, the best three months of the year, November, December, January, right? And then, you know, we go into the spring.
I get it. Okay, this is... I'll grant you this one. After all, you have a scientist who said it works, so I'll grant it to you. Give me another goodie.
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One of the things that I discovered, and this is one that's changed, is the monthly cash flows. What my father used to call the monthly five-day bulge. Most of the market's gains were on the last day of the month and the first few days of the month because everything sort of happened. It doesn't occur so much...
As much anymore. Correct. Things have sort of come... the monthly flow has changed a little bit, and that's, you know, one of our jobs is to track the changes in the seasonal patterns and behavior of the market and what people do. So, we were sitting back there in the old conference room looking at the... and this is one of the calculations I learned to do by hand. I would underline upticks in Barron's with a red pencil, a red pen, and a little ruler, and then add them up on an adding machine and graph paper when we first... before we brought it into Excel and, you know, now...
I started my career on the cusp of that. So, exactly what you're talking about. You had these enormous sheets of paper where you were writing stuff down.
We had the Barron's lab pages as high as me in my father's office closet.
Right, just the lab pages torn out.
So, we're looking at this and we're seeing this, you know, it used to be the last day and the first few days was this, you know, strong part of the month and everything else was kind of flat, and we see this all of a sudden this mid-month spike starts to appear. Okay, like, what's going on there? And, you know, I think it must have been Pop had this aha moment. We kind of came to it together. This is the bimonthly or the every-two-weeks payroll deductions going into 401ks and retirement accounts. And when money comes into a mutual fund, they got to do something with it, right? They have to put it into the market.
Right. But let me explain that to the viewers, that mutual funds are only allowed to have a certain amount of cash. So generally, let's say 5%. They're not allowed to have more than 5%. So if all of a sudden people are putting money in because of their 401k, they got to buy. It's not optional. So that changes the monthly...
So as 401ks got bigger, this pattern emerged.
Emerged where you see that mid-month, and then it's like the super eight days. And this is something that my director of research, my business partner, and I, we continue to battle about every year: is it working? It comes and goes. So there's definitely some fluctuations there with the monthly trading pattern, and each month has its own personality. You know, the beginning of August is notoriously weak as everyone just sort of exits the street, hits the Hamptons, wherever they're going, and you see things like that. The biggest, strongest turns are, you know, October, November, that end-of-month, that turn-of-the-month trade there is very strong. One of the other things going back to my early days is the intraday trading patterns.
Intraday. Back in '87, Barron's started covering, and it's not as good as it used to be because it's too late now, but they started covering the half-hourly ticks of the Dow. Okay, the lab pages, again, something I did by hand, and there's a couple of pages in the back of the book where it shows the average day and then each day of the week. And what you see is this consistent pattern where the opens are weak, which is sort of the dumb money, you know, in the morning, and then you get a little bit of a pop, and then a low around 10, 10:30, and then the late-morning rally, you know, settles off for lunch, everyone's got to get a sandwich or something, right? And you have a rally, and then, you know, everyone starts to drag around 2, 2:30, you got to get another coffee, a Diet Coke, whatever, to make it through the end of the day, and then you get that end-of-day rally, which is the smart money coming in, the rally of the close usually, I mean, unless something's going on there.
But today almost all the trading either takes place in the first hour or the last hour. What impact does that have from your perspective?
What I've seen is despite all of this algorithmic trading and high-frequency trading, all this stuff, this pattern remains persistent. You know, sometimes I trade, I pretty much eat my own cooking. You know, what we put in the newsletter, the ETFs and the stocks out there. And every time I go to take a position or get out of one, when I become a trader, you know, and I've seen many times now, I go in there, try to get the stock or the ETF at the price I like, and it's a little bit up, and we always say, just wait till 2, 2:30 when the market will settle down, leave your buy limit in, you know, at the price that you analyzed, you know, when the market was closed, and you get it. So I continue to see this happen despite all of this computer-driven trading and all this action in the beginning and the end.
The pattern remains. The pattern remains because who programmed these algorithms?
People.
People, human beings. And you know, there's still this action throughout the day even though it's run by computers.
Okay. Give me another one.
Ah, let's talk about that.
Okay.
What's the pattern that you see in sector seasonality? I mean, this year for example has been a little strange in that, and this is partly the war, that basically everything that did poorly last year is doing well and everything that did well is doing poorly. It's an absolute flip this year, which feels a little unique.
You got to remember that seasonality is what happens generally over time. There are going to be events and things that change that, and at some level, as I mentioned with the monthly cash flows, the patterns shift. But right now, you know, like with utilities for example, normally, and I'm in the XLU, recently with our seasonal trade, great worst six-month period trade from March through October.
Utilities. But with the data center and all of the need for electricity, we've seen utilities do very well. Besides that, last year's trade was great with that. But you know, we do track, we do stick to our playbook, and getting back into it this year, you know, it was up a little bit, but we did find a little weak spot to get in there. So we're in utilities for the worst months of the year. Another seasonal sector trade, two of them actually, is copper and energy.
And what's the seasonals for that?
Seasonals there. Copper tends to make its low in December when the construction activity is at its seasonal low in the dead of winter, and then top out around April, May. Similar with the energy stocks, the XLE stocks, not just oil itself but the companies, tends to make a December low and start to top out in April, May. So both of those trades set up really nicely seasonally last year. We did get a nice push from the Iran war premium with energy, reversed for copper miners. We've subsequently got stopped out of the miners with a decent gain, but the trade set up really nicely. So you get a combination of the seasonal pattern setting up, a little technical attractive entry level or buy point, and then a macro trend, an economic trend, and you lay them all together. So we like to look at things with these five disciplines: seasonality, fundamentals, technicals, monetary policy, and sentiment.
So tell me a pattern that used to be very strong and is no longer the case.
They do. And I've seen it. My father called it the indicator graveyard.
The indicator graveyard. So that's like my stock graveyard of all the stocks I had, my losers.
Yes. You always learn from your investment mistakes. Another one, a Yaleism: if you don't profit from your investment mistakes, somebody else will. So you got to write them down. So the September reverse barometer became one of the old ones that was relegated to the indicator graveyard.
You know, the market would do exactly the opposite over the next three months, whatever September did. If September was down, the market would rally after that. If it was up, it would go down. Doesn't work anymore. September doesn't work.
No. What about, do you think there's some sort of January effect that if the market is up like in early January, it's up for the year, and if it's down in early January, it's down for the year? Is there truth to that?
There is. Again, my father invented the January barometer.
Yes. Not the January effect. The January effect was an old thing originated by a gentleman named Sydney Wtel back in the '40s, who was an investment banker, which was small caps outperform large caps in January, which isn't really true as much anymore. That small cap outperformance tends to start, again documented in the book, the last two weeks of December seems to be the biggest period of time when like the Russell 2000 outperforms the 1000 or the Dow and S&P tends to start around Halloween as well, and then after Thanksgiving. So that's the January effect. The January barometer: as January goes, so goes the year.
Is that all of January or just like the first few weeks of January?
