Tuesday, September 3, 2013

Keystone's September Seasonality Factors for Trading the Markets

The month of September is typically down about 1.2% and is the worst month of the year for the Dow Industrials.  September is typically a weak month for the over-the-counter and small cap stocks.  In general, the largest market gains are realized November thru April with flat returns May thru October. Thus, the markets remain two months away from the start of the yearly strength period.

Typically, at the start of any month, the markets are bullish into the fourth day of the month. OpEx Friday's are typically up, that is 9/20/13. Typically, during OpEx week, markets are bullish from a Tuesday low to a Wednesday high, that is 9/17/13 to 9/18/13, which corresponds to the major Fed announcement on 9/18/13.  Q4 (Oct-Dec) is strong for technology and biotech but that quarter remains one month away.  Q3 ends this month on 9/28/11 so expect window dressing shenanigans late September. Window dressing is where funds and money managers sell losing stocks and buy winning stocks, especially at quarter's end, so the quarterly statements to clients appear that they are positioned properly in the hot stocks.  September results are important since if Q3 is up for the markets, Q4 is up about 74% of the time.

Drilling down for September, as a blanket rule, this month is the worst month of the year for stocks. The first Friday is typically a triple digit day for the Dow Industrials, largely due to jobs data, but in this recent environment, a triple digit move this Friday, 9/6/13, will not be a surprise. Congress is returning this week and will be back in session next week, 9/9/13 and on, which is usually bearish for markets.

Mutual funds rebalance their portfolio's each year in the late September early October time frame. The high in 1929 was marked by the day after Labor Day, thus, this day can be a tumultuous turning point each year. Labor Day may chart the path forward for stocks into year-end.  Typically, markets move down between OpEx and mid-October. As a rule, traders tend to avoid buying stocks between September and mid-October.  The week after OPEX in September has been down about 80% of the time so keep this in mind for the week of 9/23/13. An old Wall Street adage is "Sell Rosh Hashanah and buy Yom Kippur," although some traders will tell you the opposite. Rosh Hashanah begins 9/5/13 and Yom Kippur is 9/14/13.

For commodities, typically you sell natty around Labor Day and buy oil. Natty is bot again in May for the summer air conditioning season. August thru October is typically up for gold. September is the Indian marriage season and India consumes one-third of the world's gold supply. China gold sales also pick up during this time period. Typically, September is a good month to buy steel.

Even though history tells us that September is the worst month, in recent years, the SPX is up 6 of the last 9 years for the month of September; the last two years and 2008 are the three down Septembers.  September 2010 was the best September since 1939. The last couple days of this month the markets typically see a pull back of almost one-half percent, about 8 SPX points. Watch back-to-school spending since this is a preliminary indicator for holiday sales.

On the esoteric side, there is a new moon on Thursday, 9/5/13, and markets tend to sell off through the new moon which would be 9/4 to 9/6.  The full moon is 9/19/13, and markets tend to be bullish through the full moon which would be 9/18 to 9/20.  A major Bradley turn occurs on 10/8/13 which may cause market affects starting the month of October. Keystone's Eclipse Indicator targets the potential for a large broad market sell off around 9/26/13, give or take a week or two on each side, thus, between 9/12/13 and 10/10/13.  Another window will open between 11/12/13 and 12/10/13.

In conclusion, September is the worst month of the year for the markets, typically down about 1.2%. Labor Day is a key pivot point for the intermediate market trend.  Congress is back in session 9/9/12 which is bearish. The week after OpEx, 9/23/13, is typically down 80% of the time. Watch for Q3 window dressing from 9/23/13 on which conflicts with the week after OpEx weakness. Since September did not start with a short week, the typical third week weakness may appear during the week of 9/16/13. The Fed news on 9/18/13 will likely greatly affect market direction.

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