Despite some last ditch heroics in the market over the past week; the market looks like it will end down on the month about 5%. In our most recent article, we showed that a rally into the end of a quarter bodes well for the beginning of the next quarter. This article tries to add confidence to those numbers by determining how the market typically plays in October and then determining how October tends to rebound after a poor September.
The Dow Jones Industrial Average and the S&P 500 indices both show strong Octobers, with average gains over 4% for each. Since 1980, both indices have been up in the month of October 68% of the time. These figures are interesting but not completely insightful without more development.
We then took both the DJIA and S&P 500 Indices throughout history to see how they perform in October after poor Septembers:
This data represents both indices during the Octobers following a September that experienced between a 0% and 5% price decrease (which we expect to see by market close Friday).
The first thing that jumps out at us is that the Dow Jones Industrial Average has been up 85% of the time, with average gains approaching 4%. Even the S&P 500 show gains 71% of the time that helps boost confidence heading into next week.
With both this and our previous story hinting that the beginning of October will begin on with a bullish trend we suggest buying Assurant (NYSE:AIZ). They are beginning an upward trend. If it can test its 200 Day SMA, it can test the $38 level. Last two times AIZ tested the 200-Day it saw upward of 7% gains. With what we see to be an upcoming bullish rally next week, we do not see any reason why AIZ can’t retest this level.
Other bullish stocks that we like right now are Apple (NASDAQ:AAPL), which should be bought on this dip and will prosper in a strong October. We also like Yum Brands (NYSE:YUM) as the company reports earnings next week, and they have had back-to-back strong reports and have been sold off as of late. Constellation Brands (NYSE:STZ) is one of our top-rated beverage companies, and they are also reporting earnings. We expect a move into the 20s in October.
Disclosure: I am long AAPL.
Additional disclosure: We may initiate long in YUM in next 72 hours.