The Ghost Month

You might be hearing a lot of talk about ghost months lately and have been curious to know what’s it about and why it matters to you as a trader.

This years Ghost month starts on August 13 and ends September 10 year 2007

The Ghost Festival is a traditional Chinese festival and holiday, which is celebrated by Chinese in many countries. In the Chinese calendar (a lunar calendar), the Ghost Festival is on the 14th night of the seventh lunar month.

In Chinese tradition, the seventh month in the Chinese calendar is called the Ghost Month, in which ghosts and spirits, including those of the deceased ancestors, come out from the lower world to visit earth. The Ghost Festival is the climax of a series of the Ghost Month celebrations. Traditionally, ancestor worshiping was an important part of the festivals, with activities including preparing ritualistic offering food, and burning hell money and bags containing cloth to please the visiting ghosts and spirits of the ancestors, as well as other deities. A very solemn festival of ancestor worshiping, the festival nevertheless represents a connection between the ancestors and the descendants, the living and the dead, earth and heaven, as well as body and soul.

So why does this matter to you? Well ghost month is embedded in the chinese tradition where you’re not supposed to spend unnecessarily during the ghost month. this really does happen every lunar ghost month of the year, as some foreign (Asian) funds do not like to make investments at this time. Stock trading is considered an unnecessary expense what this means for traders is less liquidity. If there’s nobody there to really buy up a stock then there’s really no way for stocks to go but sideways or even…. DOWN

Coincidently ghost month is in part of the 3rd quarter slowdown if you’ve ever heard of the saying “sell in May and go away” then you are familiar with this. the return part of this statement though coincides just after the ghost month. late September onwards to the Christmas rally (This is another story) Sometimes it’s odd that all of this fits together, but really who are we to question the Gods. Its always prudent to always observe the market, bend to its ways like a bamboo tree that sways with the wind. So must you be if you wish to trade the Asian markets.

The latest edition of the American stock traders Almanac suggests that “sell in May and go away” was profitable over a 54 year period beginning in 1950. Calculations conducted on a $10,000 investment in stocks and shares back in September 1950 and then sold in the May of every year until 2004, would have seen the initial investment of $10,000 evolve into $486,000. But by doing the opposite and selling in September and buying during May, that $10,000 investment would have actually been reduced to $9,640. Presumably, the logic behind the adage was that investors are vacationing in the Hamptons during the summer so stock market volume and price movement diminish.

The old Wall Street saying goes: “Sell in May and go away,” because the period from November through April results in greater gains than the period from May through October. So, any potential reasons why? ·

Tax returns due in April usually result in a lot of folks putting money into retirement accounts like Roth and Traditional IRAs. ·

Funds start to dump losers prior to the end of their fiscal years and some might be taking advantage of the wash rule. ·

The worst month of the year for the Dow, NASDAQ and S&P 500 is September, that can’t help the six month period. ·

People like to take the summer off.

Why does “sell in May” tend to work so well? May itself is not really that bad, the Almanac’s Hirsch said, and sometimes the traditional end of year rally can start in mid-October. It’s the Memorial Day to Labor Day period that’s the worst, and that tends to give the whole six months a bad name.

By late May, tax refunds are over, so the flow of fresh funds into stocks ebbs, and analysts and investors who have been patient with companies struggling with weaker earnings or other issues tend to become less patient.

Then it’s summer, a period that’s been weaker for U.S. stocks and stocks around the globe, the Almanac shows, with people spending more time on the beach than in the boardroom or on the trading floor. Lower trading volume tends to limit stock gains.

By the time fall kicks in, the psychology has switched to a back-to-school, back-to-work mentality and from a stock standpoint, to house cleaning. In addition, big mutual funds tend to dump losers in anticipation of the end of their fiscal year in October.

So In conclusion Always mind the weather and the particular season.It pays to know what kind of season your working with. otherwise youwill be fighting an uphill battle swimming against the tide.The more effecient you are the better the return. One does not have to trade all the time to make money. take a breather relax, watch a movie. enjoy life and reflect.

Ghost Month for 2009 will start at August 20 to September 18.

Comments

  1. Jing Ortega says:

    Hi,
    I recently registered a business, now we’re in our construction stage and will be completed sometime Aug 27 to 31. In reference to the Ghost Month, would it not be a good idea to open from Aug 27 to Sep 20, which is the end of the Ghost Month?
    Thanks,
    Jing

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