Cycles Glossary

Calendar effect:  The tendency of stocks to perform differently at different times, including such anomalies as the January effect, month-of-the-year effect, day-of-the-week effect, and holiday effect. [mprofile.com]

Double Witching: Fancy Way to Say: Normal Options Expiration. If the third Friday of the month isn’t a triple witch then it’s a double witch. Since there are four triple witchings a year it leaves the other eight as double witchings. That just means it’s a normal options expiration where the following expire:

• stock options
• options on stock index futures

double witching hour: The final hour of the stock market trading session on the third Friday of all months other than March, June, September, and December, when stock option and index option contracts expire. See also triple witching hour.

January Barometer:  Market forecasting tool whose statistics show that the market rises in years when the Standard & Poor’s 500 Index is up in January and will drop when the index is down for that month.

January Effect:  The tendency for securities prices to recover in January after tax-related selling is completed before the year-end. The January Effect is caused by year end selling for tax losses, recognizing capital gains, or effecting portfolio window dressing. Even though the sell off depresses the stocks, it has nothing to do with their basic worth. Bargain hunters may quickly buy in and thus, cause the January rally.

October Effect: The perception that the stock market tends to do poorly in October.  Although historically there has been a slight underperformance in October which most observers attribute to chance, the psychological effects of a few serious market crashes in October have kept the perception alive.

Santa Claus Rally:

Triple Witching: Fancy Way to Say: Mass Derivative (i.e. options, futures) Expiration. Four times a year, on the third Friday of the quarter ending month (March, June, September, December) three different types of derivatives related to stocks expire:

• Options on Individual Stocks
• Options on Stock Index Futures
• Stock Index Futures

The ‘mass’ expiration can cause wild gyrations and false moves in prices as contracts are covered, rolled over, etc.

triple witching hour: The final hour of the stock market trading session on the third Friday of March, June, September, and December, when option contracts and futures contracts expire on market indexes used by program traders. The simultaneous expirations often set off heavy trading of options, futures and the underlying stocks. See also double witching hour.