Can Goldman Sachs, JPMorgan Chase Buck Their Bearish November Trend?

Bank stocks GS and JPM have historically struggled during the month of November

Nov 1, 2016 at 11:23 AM
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Financial stocks have fared well recently, helped by strong earnings and mounting expectations for a Fed interest rate hike. However, historically speaking, November tends to weigh on bank stocks. Below, we'll take a closer look at how November seasonality has hit financial giants Goldman Sachs Group Inc (NYSE:GS) and JPMorgan Chase & Co. (NYSE:JPM).

Before we do that, here's a quick snapshot of the 30 worst S&P 500 Index (SPX) stocks over the past decade, based on November returns. The list comes courtesy of Schaeffer's Senior Quantitative Analyst Rocky White:

worst november stocks november 1

As you can see, GS has performed quite poorly over the last 10 Novembers, finishing higher just 30% of the time. On average, the bank stock has lost 3.5% during the month -- though it bucked the trend last year, tacking on 1.3%. Below is a further breakdown of the shares' year-by-year performance during November.

goldman sachs gs november 1

While GS stock has struggled in past Novembers, it's been red-hot heading into this month. Since touching a three-year low of $138.20 in late June, the investment bank's shares have soared over 29% to trade at $178.71. This technical strength is reflected across most financial names, too, as our internal Sector Scorecard reveals 81% of the bank stocks we follow are trading above their 80-day moving average -- the highest percentage of any sector.

Yet, options traders have shown a near-extreme preference for long puts over calls. Specifically, Goldman Sachs Group Inc sports a 10-day put/call volume ratio of 0.91 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) -- just 1 percentage point from a 52-week peak. However, given the bank stock's technical tenacity of late, a portion of these put purchases were likely at the hands of shareholders hedging against an unanticipated tumble.

Turning to JPM, the financial stock's November performances have mirrored those of its sector peer. Looking back 10 years, the shares have ended the month higher just three times, and on average, they've surrendered 2.6% of their value. As with Goldman Sachs, though, JPMorgan outperformed last November, jumping 3.8%.

jpmorgan chase jpm november 1

JPM has started the month off on the right foot, earlier hitting an annual high of $69.78. At last check, the shares were 0.4% lower at $68.99, but have still rallied hard off their early February low at $52.50.

Not surprisingly, options traders have taken a glass-half-full approach toward JPMorgan Chase & Co. in recent months. Specifically, the bank stock has amassed a 50-day ISE/CBOE/PHLX call/put volume ratio of 1.66 -- just 2 percentage points from an annual peak. Likewise, open interest is very call-heavy among near-the-money strikes in the November series, per JPM's front-month gamma-weighted Schaeffer's put/call open interest ratio (SOIR) of 0.42.

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