S&P 500: Halloween Seasonality Effect + New Uptrend in Earnings

SP:SPX   S&P 500 Index
Seasonality: "The period from November to April has significantly stock market stronger growth on average than the other months of the year. The Halloween effect was evident in 81 out of 108 countries in a research study using all historical data available. Importantly, the researchers also found the effect to be increasing in strength: Over the past 50 years, the difference in returns widened to an average of 6.25%. "

Earnings: Is the "S&P 500" earnings recession over? "58.2% of the sector participants on the "S&P 500" index have already reported their third-quarter numbers. Earnings for these companies have increased 2.2% from the same period last year while revenues are up 1.3%%, per the latest report. Of this, 73.5% reported ahead of "EPS" estimates and 57.4% surpassed revenue estimates. This reporting cycle has seen more positive surprises and fewer negative revisions to the current-period (2016 Q4) estimates. Notably, the third quarter is on track to be the first quarter of positive earnings growth after five consecutive quarters of earnings decline for the "S&P 500" index." "The recemt data shows better earnings performance than we have seen from the same group of 291 index members of the "S&P 500" in other recent earnings periods (...)"

Therefore there are two arguments with the strong seasonality ahead as cycle and as fundamental reason the end of earnings recession to start to go long, while the majority is bearish and short due to the US election. A negative shock risk is the FED meeting this week on Tuesday and Wednesday in the first week of November, but besides that I see a chance of a rally at least until November 8, 2016. The outcome of the election is going to either accelerate the outlined uptrend or it will be used to place shorts ahead of a crash due to the result of the election.

Long entry: 2120-2125
Stop loss: 2115
1. Target: 2150
2. Target: 2165
Risk: 5 points
1. Reward: 20-25 points
2. Reward: 35-40 points
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