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The Solstice and Stock Trends

If you take the behavior of the sun in the sky as a metaphor for the stock market, there’s one lesson to be learned.

Stock Market Video

The Solstice and Stock Trends

This Week’s Fortune Cookie

In Case You Missed It


In this week’s video, Mike Cintolo talks about the sudden market rally this week and what it means going forward. (Hint: good things.) Mike’s not fully bullish, and there are still a bunch of stocks that aren’t acting well, but he has his eye on a bunch of growth stocks that have set up nice launching pads-if the market kicks off from here, he believes we’ll see some new leadership emerge in the weeks ahead. Click below to watch the video.


Whether you look at it from a commercial, a religious or a cultural standpoint, Christmas is clearly one of the heaviest hitters of the year’s many holidays. It constantly threatens to swamp Thanksgiving, sneaking into store displays, TV commercials and catalog deliveries earlier and earlier. Not even Halloween is safe.

And New Year’s Eve turns into just a football-flavored excuse to stay in party mode for another week.

I’m a Christmas enthusiast myself, although I prefer to think of its 12-day duration as starting on December 25, not ending then. But that’s another story.

Where I part company with many people is that I see December 21, the Winter Solstice, as much more important than it gets credit for.

The Winter Solstice is the day with the least sunlight of the year, when the sun is lowest in the sky. It was enormously important to our early ancestors, who developed their astronomy skills largely as a way to understand the movements of the objects in the sky, especially the one that gives light and heat, melts the snows and (apparently) brings the plants back to life in the spring.

I don’t think it makes me a neo-pagan or a sun worshipper to appreciate and celebrate the return of the light. I’m not even a sufferer from Seasonal Affective Disorder, the condition that should have a group of people jumping for joy on December 21 (at least if their condition doesn’t have them too depressed). But I am certainly a commuter who knows the difference between getting up, getting dressed and driving to work in the dark (and home again in the same condition) and its opposite.

No, I have two things about the Solstice that I really enjoy. First, I love just the idea of our long-forgotten ancestors noticing, tracking, calculating and predicting the Solstice and the other goings on in the sky. These early scientists didn’t have the Internet, books or even a darned telescope, yet they mastered the schedules of the stars and the planets. It’s an accomplishment that we take for granted, but we shouldn’t. I’d even go so far as to say that if more of us paid really concentrated attention to the natural phenomena in the real world, we might astonish ourselves with what we could discover.

My second reason for being a Solstice booster is that it gives me semi-annual opportunities to give a little sermon about trends. And understanding how trends work is vitally important to a growth equity investor.

Here’s my riff on the Solstice.

If you take the behavior of the sun in the sky as a metaphor for the stock market, there is a valuable lesson to be learned: Trends don’t go on forever, and the moment when they reverse their direction is always when things are either at their lightest or at their darkest.

Markets top when optimism is at its highest and the last few latecomers to the party finally conquer their fears and jump in. In their minds, it finally looks safe, because there is safety in numbers. These are careful, skeptical people, and it takes a lot of enthusiasm from everyone else to get them to take the leap and put money in the market.

But, by definition, when the last person enters the market, the market must go down. There’s no more helium to fill the balloon. So, just as with the Summer Solstice, the day of maximum sunlight is the day the days start to get shorter. The contrary case is even more important for a growth investor, because a market bottom is the moment of maximum discouragement. It’s the day when the last sorrowful investors finally capitulate, sell their stocks and vow never to invest again. And because there’s nobody left to sell, the market must go up.

Anyone who appreciates a bargain, who understands how trends work or studies market history, knows that a market bottom is a phenomenon worth seeking out. The sooner after a bottom you get in, the more you can make.

Nobody gets in at the bottom, of course, except maybe by chance. But, like Solstice watchers everywhere, if you can recognize one when it occurs, you’re way ahead of the crowd. Cabot’s growth investing disciplines take tops and bottoms so seriously that we have a whole family of indicators that help us to assess the state of the market and recognize when momentum reverses either up or down. These market-timing indicators are powerful and valuable. If you’d like to see how they work, you should visit the Cabot website to see what we have to say. And if you like what you read, you can get a trial subscription to Cabot Market Letter or Cabot China & Emerging Markets Report to see how these disciplines work in the real world.

Okay, sermon’s over. I hope you enjoy the Solstice tomorrow and the extra one-and-a-half to two minutes of light per day you get in January and the additional two-and-a-half minutes of light you get in February. Then it’s just a quick jump to June 21, when summer begins and the days start getting shorter again.


Here’s this week’s Fortune Cookie. Remember, you can always view all of the buttons by clicking here and all the Fortune Cookies by clicking here.

Tim’s Comment: This doesn’t work for me. Sure it’s poetic; you might even build a religion around it. But at root, it’s the kind of thing a Neanderthal might have thought, if only he had the right words.

Paul’s Comment: Like Tim, I’m a little uncomfortable with a saying as obviously “inspirational” as this one. I chose it because it seemed appropriate for the Solstice and because it lets me point out that every market phase has its uses. In a down market, it’s easier to see which stocks are really strong, for instance.


In case you didn’t get a chance to read all the issues of Cabot Wealth Advisory this week and want to catch up on any investing and stock tips you might have missed, there are links below to each issue.

Cabot Wealth Advisory 12/15/14 - Bourbon and Oil and Supply and Demand

Cabot Stock of the Month’s Chief Analyst Tim Lutts writes in this issue about the quirks of supply and demand in the prices for various liquids. Tim also gives the first of his new series called 10 Revolutionary Stocks. Stock discussed: Alibaba (BABA).

Cabot Wealth Advisory 12/16/14 - A Strong Stock to Build On

I write in this issue about the usefulness of charts comparing the movements of the market over the long term and the short term, which is why staying in step is so important to your results. Stock discussed: Lowes Companies (LOW).

Cabot Wealth Advisory 12/18/14 - 10 Year-End Stock Investing Tips

Chief Analyst Mike Cintolo, who heads Cabot Market Letter, gives 10 useful tips to improve your growth stock performance next year. Stock discussed: Alliance Data Systems (ADS).

Warm holiday wishes,

Paul Goodwin
Chief Analyst, Cabot China & Emerging Markets Report
And Editor, Cabot Wealth Advisory

Paul Goodwin is a news writer for Cabot’s free e-newsletter, Wall Street’s Best Daily.