Beware the Ides of March

On the eve of the Ides of March DJIA registered an ominous 6th Down Friday/Down Monday of 2022 – emblematic of the entrenched downtrend and headline risk from the war, the Fed and inflation. The bulls are clearly on the run. But we can find some solace in the fact that support around the February 24 intraday lows held up again today. Though that support is admittedly tenuous. The next level of support is down near the March 2021 lows around DJIA 31000, S&P 3875, NASDAQ 12500, NDX 13000. Russell 2000 seems to be finding support above 1900.

Julius Caesar failed to heed the famous warning to “beware the Ides of March” but investors have been served well when they have. Stock prices have a propensity to decline, sometimes rather precipitously, during the latter days of the month. March is a volatile time for the market. It is the end of the first quarter, which brings with it Triple Witching and an abundance of portfolio maneuvers from The Street. And those maneuvers are currently being exacerbated by the war headlines, the Fed’s much anticipated first interest rate increase in years and high inflation.

March Triple-Witching Weeks have been quite bullish in recent years. But the week after is the exact opposite, DJIA down 22 of the last 34 years—and frequently down sharply. In 2018, DJIA lost 1413 points (–5.67%) Notable gains during the week after for DJIA of 4.88% in 2000, 3.06% in 2007, 6.84% in 2009, 3.05% in 2011 and 12.84% in 2020 are the rare exceptions to this historically poor performing timeframe.

Fear is high and sentiment is low – both near extreme contrary buy levels. Our friends at Investors Intelligence noted in their US Weekly Review that “Both Advisors Sentiment Readings and Selling Climaxes (25th February) indicate that significant market weakness is over for the time being and selected purchases can be considered.” March market trend reversals from extremes are not unusual as we experienced in 2000, 2003, 2009 and 2020. Any inklings of de-escalation would likely rally stocks.