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The Little Book of Stock Market Cycles Hardcover


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Product Details

  • Hardcover: 215 pages
  • Publisher: Wiley; 1 edition (August 7, 2012)
  • Language: English
  • ISBN-10: 1118270118
  • ISBN-13: 978-1118270110
  • Product Dimensions: 7.4 x 5.4 x 0.9 inches
  • Shipping Weight: 9.6 ounces (View shipping rates and policies)
  • Average Customer Review: 4.2 out of 5 stars  See all reviews (18 customer reviews)
  • Amazon Best Sellers Rank: #98,034 in Books (See Top 100 in Books)

Editorial Reviews

Amazon.com Review

Q& A with Author Jeffrey A. Hirsch

Jeffrey A. Hirsch
  1. What impact do you think the 2012 presidential election will have on investors?
  2. Presidential elections every four years have a profound impact on the economy and the stock market. After a president wins the election the first two years are spent pushing through as much policy as possible. Frequently the market, economy, and country experience bear markets, recessions, and war. Since 1941, the post-election year has posted the lowest average gain for the Dow Jones Industrials at 4.5%.

    Seasonality has been on track since September 2009. 2011 unfolded in near textbook fashion. 2012 is also unfolding in rather typical seasonal and election year fashion. The catalyst for 2011's decline was persistent European debt concerns. These sovereign financial troubles continue to pressure markets. Slowing growth in emerging markets, a historically weak post-election year track record, the expiration of tax cuts, and unemployment benefits at yearend is likely to make for an exciting three-ring circus in D.C. after Election Day and plague stocks in 2013. Markets do not like uncertainty.

    Unless a full-blown bear market occurs in 2012 or the market slogs along into the New Year, market gains will be harder to come by in 2013 than they have since the March 2009 bottom. A more likely scenario is that seasonal and economic softness gives way as the presidential election approaches and some resolution in Europe coincides with at least the hint of an easing move from the Bernanke Fed.

    If things look good for Obama, October is likely to be stronger. If Romney wins, expect a bigger move in November. Either way, there have been only two losses in the last seven months of election years for the S&P 500 since 1952. Also on the bright side for 2012, the DJIA has averaged 9% in years when a sitting president was running for reelection; win or lose.

    2013 is another story. Markets are likely to come under pressure as whoever the president is will have tall orders to remedy the economy, the deficit, and the dysfunctional government. The easy economic data and corporate results comparisons of the past few years will be gone. Foreign hot spots and diplomatic issues will also require renewed attention from the White House once the campaigning and/or inaugural balls are over. Central banking will remain accommodative, but there is little more they can do. After the yearend rally and positive 2012, I am concerned that the next major bear market will occur in the 2013-2014 period.

  3. What are some of the cycles you talk about in the Little Book and how can investors use those?
  4. In the Little Book of Stock Market Cycles I have boiled down all the most pervasive and persistent market patterns. From our nearly 50 years of research these are the ones that continue work. I begin with the long term, multi-year secular bull and bear market patterns. Then I delve deep into the nuances and details of the four-year presidential election stock market cycle, the perennial seasonal pattern before I drill down into the prevailing monthly, weekly and daily patterns. Whether you are day trading, trend trading or investing for the long haul the Little Book provides insight, guidance and confidence when you are making buy and sell decisions.

  5. What's the best time of the year to trade the market?
  6. The best time of the year to go long stocks is October and the best time to sell is April. This is our Best Six Months Switching Strategy that we discovered in 1986. The saying "sell in May and go away" has become quite well known. But I am amazed at how few fail to realize, and capitalize on, the flip side of this phenomenon. You can't sell in May if you don't buy in October. Investing in the Dow Jones Industrial Average between November 1st and April 30th each year and then switching into fixed income for the other six months has produced reliable returns with reduced risk since 1950. Our Best Months Switching Strategy will not make you an instant millionaire, as other strategies claim they can do. What it will do is steadily build wealth over time with half the risk (or less) of a "buy and hold" approach.

    Generally speaking, during the Best Months you want to be invested in equities, mutual funds or exchange traded funds (ETFs) that offer similar exposure to the companies that constitute the Dow, S&P 500, NASDAQ and Russell 2000 indices. During the Worst Months, switch into Treasury bonds, money market funds, or a bear/short fund. Grizzly Short (GRZZX) and AdvisorShares Active Bear (HDGE) are two possible choices. Money market funds will be the safest, but are likely to offer the smallest return, while bear/short funds offer potentially greater returns, but more risk. If the market moves sideways or higher during the Worst Months, a bear/short fund is likely to lose money. Treasuries offer a combination of decent returns with limited risk. In the 2013 Commodity Trader's Almanac, a detailed study of 30-year Treasury bonds covers their seasonal tendency to advance during summer months as well as a correlating ETF trade.

    Additional Worst Month possibilities include precious metals and the companies that mine them. SPDR Gold Shares (GLD), Market Vectors Gold Miners (GDX), and ETF Securities Physical Swiss Gold (SGOL) are a few well recognized names available from the ETF universe. Gold's seasonal price tendencies are also covered in the 2013 Commodity Trader's Almanac.

  7. Why?
  8. The quarterly and annual operations of institutions and the seasonal behavior of society and individuals have created a Best and Worst six months of the year. Our Best Six Months Switching Strategy revolves around the fact that most of the markets gains occur from November to April while the market is usually flat to down from May to October. 2012 is a case in point.

    There is and ebb and flow of cash and trading volumes that is clearly influenced by the perennial activities of institutions individuals and society. Market seasonality is a reflection of cultural behavior. In the old days, farming was the big driver, making August the best market month-now it's one of the worst. This matches the summer vacation behavior where traders and investors prefer the golf course, beach, or poolside to the trading floor or computer screen. Institutions' efforts to beef up their numbers help drive the market higher in the fourth quarter as does holiday shopping and an influx of year-end bonus money. Then there's the New Year, which tends to bring a positive new-leaf mentality to forecasts and predictions and the anticipation of strong fourth- and first-quarter earnings. After that, trading volume tends to decline throughout the summer and then in September there's back-to-school, back-to-work, and end-of-third-quarter portfolio window dressing that has caused stocks to sell off in September, making it the worst month of the year on average.

  9. Would you say that history repeats itself? Why or why not?
  10. History never repeats exactly, but is sure does rhyme. The collective human memory is short and the forces of greed and fear are unrelentingly powerful. As George Santayana famously said, "Those who fail to remember the past are condemned to repeat it." I like to say, "Those who stuffy market history are bound to profit from it."


Review

"The Little Book of Stock Market Cycles is ideally suited for fans of the Hirsch almanacs as well as for those who have never been exposed to seasonal statistics and who have a hunch that they may have missed something useful." (SeekingAlpha.com, August 2012)

‘…a nice primer on cycle research and an excellent starting point for further research…he has given us an insightful collection of market observations and plenty of food for thought. I recommend you add it to your winter reading list.’
(ForexPros, November 2012)

More About the Author

Jeffrey A. Hirsch is president of the Hirsch Organization, editor-in-chief of the Stock Trader's Almanac® (Wiley), Almanac Investor newsletter and www.stocktradersalmanac.com. He started with the Hirsch Organization in 1990 as a market analyst and historian under the mentorship of his father Yale Hirsch. He was handed the reigns in 2000 and continues to run the operation from his Nyack, New York offices. Jeffrey regularly appears on major news networks such as CNBC, CNN, Bloomberg and Fox News. As well as writing numerous financial columns and is widely quoted in all of the major newspapers and financial publications.

Customer Reviews

He highly recommends this book.
Grammy Eileen
We have, for instance, the best six months switching strategy and the January indicators.
Brenda Jubin
Very informative as history often does repeat it self.
Rick

Most Helpful Customer Reviews

8 of 9 people found the following review helpful By Charles Lewis Sizemore, CFA on December 19, 2012
Format: Hardcover
"There is no magic formula to make trading or investing easy," starts Jeffrey Hirsch in The Little Book of Stock Market Cycles. "Nothing can replace research, experience, and a healthy dose of luck."

History, however, can be a useful guide in understanding the environment in which you are investing. This is the focus of Mr. Hirsch's latest installment in the Little Books series. Hirsch is the Editor in Chief of the Stock Trader's Almanac and an authority on stock market cycles and seasonal patterns.

Cycle research is dismissed in some investing circles as "voodoo," but Hirsch makes a compelling defense of the discipline throughout the book and explains it with clarity: "Recurring events such as the presidential election every four years, end-of-quarter portfolio rebalancing, options and futures expirations, tax deadlines, and holidays have a predictable influence on traders and investors."

Indeed, all of these predictable events affect flows into and out of the stock market, as do many, many others detailed by Hirsch.

Hirsch starts his book with a description of secular bull and bear markets. For the uninitiated in market terminology, "secular" means long-term in this case. Secular markets tend to last 8 to 20 years, and recent history has been no exception. The last secular bull market lasted 18 years, from 1982 to 2000. The secular bear that followed started in 2000 and still persists 12 years later.

Within a secular bull or bear market, there are smaller and shorter cyclical bull and bear markets that can last anywhere from a couple months to several years.
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15 of 19 people found the following review helpful By Brenda Jubin on August 16, 2012
Format: Hardcover
Jeffrey A. Hirsch is best known as the editor-in-chief of the Stock Trader's Almanac. He draws on the extensive research behind that yearly publication for The Little Book of Stock Market Cycles: How to Take Advantage of Time-Proven Market Patterns (Wiley, 2012).

Let's get Hirsch's most controversial call--that the Dow will reach 38,820 by the year 2025--out of the way right at the beginning. He claims that this "is not a market forecast; it is an expectation that human ingenuity will overcome adversity, just as it has on countless past occasions." (p. 66) The operative equation is "War and Peace + Inflation + Secular Bull Market + Enabling Technology = 500% Super Boom Move." (p. 67) But don't buy that magnificent villa overlooking the Pacific or the Ferrari you've been coveting just yet. "[A]fter stalling near 14,000-resistance in 2012-2013, Dow 8,000 is likely to come under fire in 2013-2014 as we withdraw from Afghanistan. Resistance will likely be met in 2015-2017 near 13,000 to 14,000. Another test of 8,000-support in 2017-2018 is expected as inflation begins to level off and the next super boom commences. By 2020, we should be testing 15,000 and after a brief pullback be on our way to 25,000 in 2022. A bear market in midterm 2022 should be followed by a three- to four-year tear toward Dow 40,000." (pp. 67-68) In brief, if Hirsch's scenario plays out, we've got quite a wait for the market to catch up with our dreams.

The bulk of Hirsch's book describes the most effective market seasonalities. Take, for instance, the presidential election cycle. Since 1913, from the post-election year high to the midterm low the Dow has lost 20.9% on average. By contrast, from the midterm low to the preelection high, the Dow has gained nearly 50% on average since 1914.
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5 of 6 people found the following review helpful By L. Masonson on September 6, 2012
Format: Hardcover
Jeff Hirsch is well-known for his historical research and insights into discernible stock market cycles and repetitive seasonal patterns. Hirsch is a student of history, so inclusion of this background information is not surprising. Jeff and his father Yale and their associates have authored, over various times, the annual Stock Trader's Almanac over its 45 year history. Currently, Jeff is editor-in-chief. And he is also the co-editor of the more recent Commodity Trader's Almanac.

The strategies presented in his latest book The Little Book of Stock Market Cycles are aimed at active self-directed traders and investors not buy-and-holders. Based upon decades of data, the book provides an amalgamation of the most useful patterns and seasonality opportunities.

Hirsch first examines not only secular bull and bear markets, but also provides insight on cyclical markets. He then reviews financial panics, and the booms and busts in the 20th century. Lastly in a separate chapter, Hirsch puts forth his rational for a 500% move upward in the Dow Jones Industrial Average for the period 2009 t0 2025. This chapter is a brief synopsis of his last book titled SuperBoom published in 2011. According to Hirsch, this large market advance will be brought about by rising inflation, winding down the current U.S. wars, advances in alternative energy and biotechnology, as well as future technological breakthroughs in TV, computers, Internet and cell phone.

Hirsch fleshes out a handful of the time-tested strategies first mentioned in the almanac.
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