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The Most Bearish Month of the Year


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Jerry Welch, Commodity Insite!
Call me at 406 -682 -5010
Ennis, Montana 59729

Follow me on twitter@commodityinsite

Below is from my book, Back To The Futures in a column entitled, The Most Bearish Month of the Year penned back in the mid-1980s.

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"One of the things I learned about the futures markets a long time ago was the fact that October is the most bearish month of the year. When that month rolls around my approach to the markets is simple. Sell anything that rallies!


As October approaches, I always caution against being overly committed to the long side of any market. I have seen individual markets as well as the entire Big Four drop like a rock during an exceptionally bearish October. So why fight something that borders on being a seasonal occurrence?


In retrospect, the 80's seems to have had more than its share of negative and bearish Octobers. That may be a generalization on my part but that is certainly how I remember the past ten years.


From my weekly newspaper column dated October 6, 1983: The October Massacre. That is the way traders are describing this weeks price action for all commodities. Silver futures, for example, dropped $2.00 per ounce while soybean futures fell 94 cents per bushel in just five days.


A break of this magnitude for prices is not unusual for the markets during the month of October. For instance, the most bearish and widely known October break happened in 1929 with the collapse of the stock market. But the commodity markets have also experienced similar price collapses in 1977 and 1979.


Two weeks later:


The October Massacre continued this week with metals, grains and stock index futures all registering sharp losses. I have mentioned before that October is a tough month in which to be a bull. Not that every October is a bearish month but when it turns out that way, it is generally a killer.


Silver prices, for example, have fallen $1.25 an ounce and soybean prices 80 cents per bushel over the past four trading days. Technically speaking, there is no futures market anywhere that appears to be bullish. This was the week when the bulls yelled punt!


In the fall of 1985 I turned quite bearish towards the petroleum complex and the cattle market. I felt that both markets were very close to experiencing a significant break in price. And since the most bearish month of the year was staring me in the face, I knew which side of the market I wanted to play.


From my October 10, 1985 newspaper column: "I'm nervous as a cat! These have to be the spookiest markets I have seen in a long time. And I know it is close to Halloween and spooky is supposed to be in this time of year. But I do not like what I see or feel in this market environment.



I hate being bullish in October. I have seen Octobers so bearish and negative that grown men would cry and women would weep. All bets are off regarding any market until I see how October turns out. It will be tough being anything but a bear until November rolls around.


Until then, I repeat my message, sell the critters and crude oil.


A week later I continued my forewarning about how bearish an October can be and wrote, "Last week I urged traders to sell the critters and the crude. And so far, it looks as if I am correct because both markets are turning soft very quickly."


Over the next five months, crude oil, cattle, and most other commodity markets traded well below the highs they set the previous October. And the overall decline in prices from the fall of 1985 to the spring of 1986 resulted in the lowest inflation rate in the United States since the mid-1950s."

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Here in the first week of October, the Dow is off to its worst start to any new quarter since 2008, 11 years ago. Certainly, simply because the Dow is stumbling this early in the month it is not a given the rest of the month will be equally bearish. Or, unusually bearish for that matter. But it is October and I do hate being a bull towards any market when the trick or treat month rolls around.


If interested in my two books, Back To The Futures or, Haunted By Markets drop me a line at commodityinsite1@gmail.com. Or, feel free to call me at 406 682 5010.


There is no substitute for knowing history. Nor is there any substitute for timely and accurate information.




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About the author


Jerry Welch has been in the futures industry since the late 1970's and is a true veteran of the markets. He has been quoted often in Wall Street Journal and is author of Commodity Insite, one of the longest commodity futures newspaper columns in history. His weekly column has been published each week since the mid 1980's and is one of the most recognized names in the world of commodities.

Mr. Welch is also known widely as a, "so so" flyfisherman.  

His column is published by the Illinois Agri News in La Salle, Illinois, Cattle Today, in Fayette, Alabama as well as Consensus, in Kansas City, Kansas.

He can be contacted at 406.682.5010 for a view of his, "twice a day" market column that includes price forecasts and trading suggestions.

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