AlphaNooner - Jeffrey Hirsch Navigating Markets with the Stock Traders Almanac

Yeah.

Well, I was born, bred, weaned, raised on market cycles, patterns, seasonality. My father started the firm back in 1966 when my mother was still pregnant with me. So, I was literally born into it. And you know, we used to run numbers with an adding machine and graph paper and a little short ruler and Barron's lab pages and underlining stuff and just grew up in the mail room shipping out books to brokers for years and you know, doing some of the analysis. And then late '89, you know, I decided to start working for the big man and the rest is sort of history. We kind of clicked. You know, there were some moments when other people around the table didn't quite get what he was saying and it made sense to me. And you know, it's what, 35, 36 years later, here we are.

There's some therapy involved.

I mean, there's a lot of things have changed and things are constantly changing and that's what we do at the Stock Trader's Almanac and with the newsletter is track the changes, but what's most amazing to me is the things that don't change. And that is human behavior and you know, our habitual activities with our money. It speeds up. There's, you know, front running, there's anticipation, there's things that are changing, but people are still creatures of habit and the markets are driven by people even though there's lots of algorithms and high-frequency trading, program trading and that sort of things, but those are all built by people, by humans. Even AI has got its biases that are programmed into it or coded into it by the people that do the coding, which I'm seeing now as we use it.

I mean, there's things like this, September a reverse barometer that got relegated to the indicator graveyard. I'm seeing some changes in the monthly cash flows into markets. It used to be the last day of the month, the first four days was the monthly five-day bulge and it was the last two and the first three, and the middle three, and now we're seeing that being tested with, you know, gains spread out. First trading day of the month. But, you know, we're still seeing regular behavior around triple witching, even though they tried to make it quadruple witching.

The best six months, the January barometer, the Santa Claus rally, the four-year election cycle, these things have stood the test of time and I discussed that on a special page in our new upcoming 60th anniversary Stock Trader's Almanac 2027 edition is the 60th. I just turned 60. I'm as old as the book. No secret. And we've got a little retrospective on, you know, what's still working and what's going forward. And we also have a new forecast for the AI super boom for Nasdaq. I don't know if you saw my book from 2010, the super boom based on a cycle that Yale discovered back in '76 for the market to make these 500% moves following war and inflation with a technology kicker. So, that was another bull's-eye and we have the next phase of that, which we are, you know, all experiencing right now with this technology boom that's like nothing before it. It's a combination of everything. It's the best thing, the biggest thing since electricity. It's touching everything. We're all living it. So, I could go on.

The inflation part of the equation was a little bit different, but the difference instead of war, you know, spending, which drove the booms that are World War I and World War II and Vietnam, COVID, the spend there, the big government spend was the inflation driver there. So, that was a little different. Things are happening faster. You know, we hit the 38,820 a year or so earlier than I had projected. People are still a little incredulous about it. I find that comforting because once everyone jumps on the same bandwagon, then things stop working. I've noticed that with technical analysis a bit recently. A lot of the support levels and you know, points on charts that people looking at become, I refer to, they become like magnets. They sort of draw the market down to them and you know, we may be testing some of those here in this summer doldrums period, the you know, weak months of the year, the worst six months, the worst four months, the weak spot of the four-year cycle.

You know, there was this Trump seasonal pattern that I discovered in March. Where he likes to shake things up in Q1 and then you know, people reset their outlooks and then the market rallies for the rest of the year. We saw that in all the five years of Trump's terms, the first term in '25. That pulled a lot of that Q2 Q3 weak spot weakness forward this year. And then we had the big rally and now I'm seeing that Q3 weakness is presenting itself. Some of what's going on in the world stage is very typical midterm election year behavior. But you know, there's also exogenous events going on as well. So but coming up on August, maybe mid-July peak, I think we can test some of those levels, the old October 25 and January February 26 highs like Nasdaq 24,000, S&P 7,000. And if things unravel, that April 8th ceasefire gap sticks out on the charts to me.

The seasonal weak spot is more pronounced during the midterm election year.

It's historically been the case going back to, you know, post World War II. You know, since the fifth, since 1950 or '49 or you know, wherever you want to draw the line but the Trump seasonal pattern I just posted Nasdaq's version of it on the X feed and the blog and everything. Other people want to look that up. It's uncanny.

At Almanac Trader.

I mean, you could also do a search on any bot or you know, Google just search stock traders almanac it'll come up.

Yeah, I mean it's funny you type stuff into a Google, it pulls up its own LLM, you know, whatever.

Yeah, I mean it's kind of been happening. I mean, any way you search a database is you could call it AI if you wanted so.

I mean it's like any other boom. You know, it kind of overrides some things sometimes cuz it just keeps going up. So, I would equate it to like the late '90s of the internet boom. So, it's kind of just that, you know, pushing the bull market with less pullbacks, you know, shorter, shallower pullbacks, corrections, bear markets which we've seen evolving since the '90s, you know, since I started with my father. So, this is a big thing. I mean, this is a generational boom and it's just the early stages. I mean, to me it's kind of reminiscent of the early '90s when we like Windows 95 was coming out and it changed everything. But the difference now, and I'll give you a little tease as to where my thinking's at, is back then we had to build the hardware and the infrastructure. Yes, we need more compute. Yes, we need more bandwidth. But everyone's got these things in their hand, you know, that they can do anything on and there is fiber. There's networks. There's stuff there that... And everyone has a PC or a laptop and back in, you know, 1990, 2, 3, 4, 5, whatever, not everyone had it. And now everyone's got the equipment at their fingertips.

Everyone's connected. Everyone's connected.

I mean, you've got longer-term patterns and you know, one seasonal patterns working together. I mean, that's the art. That's the technique. It's not necessarily one wins out over the other, period. It's you have to be able to navigate and decide and recognize what's driving things in any given moment in the market. That's what people come to Stock Trader's Almanac for and our newsletter. And that's the game. I mean, that's what makes winners and losers, you know, which one can you recognize, you know, what do you recognize as working, you know, more and more informationally, you know, more powerfully at the moment.

You know, right now we've got something going on in, you know, the Middle East that's weighing on things, you know, and it changes day to day, but overall, the AI boom is going to drive things for many years.

Emotions, checking emotions is the key. Whatever the cycle is, whatever is driving it, it's really important to do your analysis and research when things are calm, when you're not trading, and then stick to your buy limits, your stop losses, your targets, and you know, stick with your system and don't overthink it. Don't you know, it's... Emotions are the bane of an investor's existence.

There's also a couple of pages in the back of the book that are a little bit more like, you know, for training you to be less emotional playing on, you know, Gerald Loeb's old, you know, investment survival checklist. There's a page that, you know, if you don't profit from your investment mistakes, somebody else will. There's a little sample of how to keep track of, you know, tips and things like that. So, there's some other things that we do that, you know, keeps emotions in check on top of just having the seasonal patterns and market history and we've been here before mentality.

I always love the phrase if you don't profit from your investment mistakes, somebody else will. It's kind of humbling, so it makes you want to write down things and keep track of what you did, you know, right or wrong. It's very common with successful managers and traders. You know, keeping your wins and losses and learning from your losses. I mean, sometimes the losses are more important to recognize either trading behavior or, you know, some sort of analysis. Yeah, I always like to check myself when I get really nervous about the market. I find I can be my own best contrary indicator and it's been working.

So, we have a market at a glance, a five disciplines mentality where we look at seasonality, you know, cycles, patterns, trends, fundamentals, technicals, monetary policy, excuse me, and sentiment. Sentiment I like to look at Investors Intelligence, bulls and bears, you know, bullish and bearish advisors percentage. Monetary policy, we have some interesting things going on there. Technicals I touched on. Fundamentals, inflation something we're concerned about. And the seasonality of the midterms. So, those are the two main things. You know, people are folks out there on the street are thinking that now, you know, energy would came down so much. I mean, it's ticking up a bit last couple days what's going on. And then inflation should come back in. Our concern is that maybe the inflation is not so energy driven, and maybe it's driven by all that spending that we spoke about. The massive government spending that continues to go on, the CapEx spend for the data centers and the hyperscalers and all that CapEx that's going on there. So, we're going to have a couple of prints. I think there... What is it? CPI's out this week or is that... Yeah, I think it's later this week or maybe next. And then PCE's at the end of the month. So, we're going to start to see if that inflation is a little stickier than just oil prices and that sort of thing. So, that's what we're watching. Midterms, you know, there's a battle for ideology coming up with, you know, what's coming out of New York City with the Democratic Socialists and the far right that, you know, with the MAGA movement. So, there's a battle going on there, and I think, you know, what we look at for political alignment, you know, the best combination historically has been a Republican Congress and a Democratic president. If things... I mean, the majorities are very thin. I mean, we just, you know, lost a Republican senator over the weekend. Rest in peace Senator Graham. And there's a couple of other people retiring, you know, Mitch McConnell's, you know, I guess he's okay now, but he's riding out his term. So, that and the house is very close. I live in a battleground district as well. So, you know, that's something that we're watching. And if that flips, that could be, you know, a drain on the market. It could be less business friendly if we don't have that sort of more fiscally minded, you know, legislative body. So, those are the things we're looking at. But right now, we're 6 months. We're looking for weakness in August, September. As I said, some of those technical levels we're looking at. We're getting into some defensive sectors. You know, health care, biotech doing well for us. Utilities. I just put out some recommendations on gold and silver, both the metals and stocks. So, once we get through that, what we set up is what we call the sweet spot of the 4-year cycle, which is the best 3 quarters of the entire 4-year cycle. It goes from the midterm year fourth quarter. It starts in October through the pre-election year, which would be next year second quarter. Dow averages 19% over the 3 quarters, S&P over 20, and Nasdaq, I think it's 29.4% now over the 3 quarters. So, this is the part where we, you know, get through the midterm elections and then the incumbent starts to prime the pump to keep their party in power at the next election. So, that's what I'm looking at.