What to Expect From the Markets in October

Last year we went up 10.9% in October, following a tough summer. Over the past several months, the S&P has plodded along, almost methodically, 1-2.5% higher every month without volatility. The theme for 2012, thus far, has been “volatility compression.” Central banks have succeeded in succoring the insecurities of equity investors through grift. Because of the nature of this unbelievable melt up, many are waiting for the hammer to drop, wishcasting for it to be blunt.

On paper, October is the second best trading month of the year, second only to April, sporting a 68% win rate for the S&P. While it’s true, the month of October is most readily known for its flamboyantly gay market crashes and subsequent Louis Rukeyser specials. It’s also fact that the true nature of the market for the month of October is of supreme bullishness.

Based upon seasonality, which happens to be a fond novelty hobby of mine, certain stocks stand out in the month of October, such as FFIV, GPS, MAKO, even ERX. There is a full report inside of The PPT, for those who are interested. We have a working seasonality engine there for your most hedonistic desires.

In short, the market looks and smells like shit. But we have winds behind our sails, courtesy of the Fed, ECB and the seemingly never-ending walk higher–which has devastated purveyors of VXX.