I'm sure you've all heard that adage, "history repeats itself". Well, I'd argue that it applies as much to the stock market as just about anywhere. Once you get down a few basic stock market trading patterns, you can apply it to your own individual trading to increase your chance of success. Over the weekend, I wrote an article on
September history titled, "What You Need To Know About September Weakness". If you didn't get a chance to read it, I'd encourage you to do so.
If we're going to look at the history of the S&P 500 or NASDAQ, which I have done for years in great detail, it makes sense to extend that historical research to technology (XLK), the sector with the largest representation in both of these major indices. One of the most reliable patterns on Wall Street relates to pre-earnings surges. Since
we're in a secular bull market that continues to be led higher by the XLK, and because mid-October kicks off Q3 earnings season, let's check out the historical trading pattern of the XLK as we approach this pivotal time frame.
I calculated the annualized return of the XLK from the 28th of March, June, September, and December through the 18th of the calendar months that follow. The XLK has produced annualized returns of +45.21%, which trails only communication services (XLC) annualized return of +56.81%. In other words, once we get past the upcoming historically-weak
period that ends on September 26th on the S&P 500 and September 27th on the NASDAQ, we will enter a very bullish historical period that takes us right up to the start of earnings season.
Historically, at least, it pays to remain cautious through the end of next week, but to prepare for a potential surge into Q4.
