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Thackray’s 2011 Investor’s Guide notes that October 28^th on average during the past 60 years is the optimal date to enter North American equity markets for a seasonal trade until May 5^th. His book notes that a $10,000 investment in the S&P 500 during the past 60 periods starting on October 28^th 1950 and ending May 5^th 2010 resulted in a portfolio valued at $924,470. In contrast, a $10,000 investment in the S&P 500 from May 6^th to October 27^th during the past 60 period resulted in a portfolio valued at $6,727. A $10,000 investment in the TSX Composite Index during the past 33 periods from October 28^th to May 5^th resulted in a portfolio valued at $187,526 whereas a $10,000 investment during the past 33 periods from May 6^th to October 27^th resulted in a portfolio valued at $6,307.

Important! These dates are average optimal dates for entry and exit over long periods of time. Actual optimal date each year is based on technical analysis and can vary by as much as four weeks. North American equity indices and related sector indices currently are overbought and their momentum indicators are showing early signs of peaking/rolling over. The optimal date for equity indices will be later than October 28^th this year. The charts will let us know the timing. Stay tuned.

Following is a list of optimal entry dates for the seasonal trade in North American equity markets during the past nine years:

Year Date

2001 November 1^st

2002 October 10^th

2003 October 27^th

2004 October 26^th

2005 October 14^th

2006 November 6^th

2007 November 27^th

2008 October 27^th

2009 November 5^th

Stocks that have recently indicated possible entry points according to technical indicators and currently trade within or are approaching their period of seasonal strength.

The countdown to Christmas begins.   We are now two month less one day away from the big day and chares of this toy company are putting the elves to work to make sure investors and Santa has everything needed for the event.   Mattel, Inc. (NASDAQ:MAT) has been outperforming the market over the past few sessions after finding a bottom one week ago.   Earnings were released on October 15 that beat expectations, however, the result failed to impress, driving shares sharply lower.   The stock is now rebounding and technicals are lining up for possible buy signals.   MAT continues to threaten overhead resistance at around $24.50 and with a period of seasonal strength approaching, a breakout may be imminent.  

Seasonal tendencies are positive between now and December 6 for gains reaching 7% on average.   Fourth quarter carries high expectations for this equity as it typically represents the most profitable quarter for the corporation that benefits greatly from the holiday season.   Only one year has failed this trend in recent history.   In 2008, expectations were 72 cents per share, however the company reported 49 cents per share, having been impacted by the downturn in the economy.   Prospects have improved significantly since that time and analysts are expecting 86 cents per share for this last quarter of the fiscal year.   Fundamental targets for shares of Mattel, Inc. (NASDAQ:MAT) are pegged at around $26.25, or over 11% higher than current levels.

• Currency wars. Discussions at the G20 meeting over the weekend resulted in a communiqué that effectively said that participants will “be nice to each other”. Hardly a compelling event! Negotiations continue, particularly between the Chinese and Treasury Secretary Tim Geithner. As expected, several participants at the meeting “took potshots” at China and the U.S. for manipulating their currencies. More news from follow up to the meeting is possible, but initial responses to the meeting in currency markets were muted and disappointing.
• The U.S. mid term election. The latest polls confirm that the Republicans are likely to win control over the House of Representatives. Control over the Senate remains “up for grabs”. The Republicans will win more seats, but may or may not reach the important 50 seat level, the best case scenario for equity markets. The real danger for equity markets is that neither party wins 50 seats on November 2^nd and the Senate is unable to call meetings due to a lack of control by committee chairmen. The last time when the U.S. government “became frozen” due to a lack of political leadership following an election was in November 2000 when the courts had to decide if Bush or Gore won the Presidency. Usually, equity markets move higher from Election Day until the New Year after a new president is elected. That didn’t happen after the Presidential election in November 2000. Uncertainty caused the Dow Jones Industrial Average to fall 7.0% by the end of November and to move sideways into January. What about this time? There is a possibility that the Democrats will win 49 seats and the Republicans will win 49 seats and the two “independents” will hold control. One of the independents effectively is a democrat. The other independent is Joe Leiberman. He is the only true independent who swings his votes in both directions depending on the issue, but has slightly favoured democratic positions. The media noted over the weekend that Joe Leiberman has been smiling alot recently.

• The November 3^rd Federal Open Market Committee Meeting. The Fed is committed to Quantitative Easing II. Equity markets already are anticipating the possibility of a $500 billion commitment. However, traders are guessing that QE II could be as high as one trillion dollars or as low as $100 billion. Fed action recently has succeeded in “jawboning” interest rates on long term Treasuries to their current low levels as well as to pressure the U.S. Dollar. Announcement of Fed actions on November 3^rd could have a substantial impact on equity and bond markets one way or the other.

The Bottom Line

Use weakness into October and November as an opportunity to acquire attractive equities and ETFs. Please be patient and wait until technical indicators are showing signs of bottoming following a short term correction. Preferred selections are economically sensitive sectors such as China, technology, consumer discretionary, materials, Canadian financial services, lumber and industrials. More information on the Industrial sector is offered below.