Wake Me Up When September Ends
The Key Charts To Watch
A question I’ve wondered for a few years (I haven’t bothered to google it).
Was Billy Joe Armstrong singing about S&P500 September seasonality?
It’s highly unlikely. Great anthem though.
With August in the books, I’m getting lots of questions on market support levels and data, so lets get on with this weeks letter and charts.
S&P500 Seasonality (70yrs Of Data)
Every year I like to highlight September to our clients and members for obvious reasons.
The data tells us that going back over 70yrs, the S&P500 has posted on average decline of -0.5% which compares poorly with every other month.
You could play around with date periods and skew the data a bit, but going back over 5yrs, 10yrs and 25yrs, it yields similar datasets.
In short, if you’re not scanning across the plains for Grizzlies, there’s a decent chance you get eaten by the bears, so I’d prefer having a little bear paranoia than being a meal.
It’s been too perfect over the last couple of weeks, with SPX running straight into the 200 Day Simple Moving Average and reaching an over bought condition.
The Technical Analysis text books got that 1 spot on.
A decent market pull back was entirely predictable. If you missed it - I DID THAT HERE (before the fact)
We’ve had some notable declines since then, which for our clients/members has been a great signal to either exit positions, or hedge long positions with things like VIX Calls and Inverse ETF’s.
SPX -8%
DIA -7.5%
QQQ -10%
IWM -9.5%
In truth, it’s been much easier to assess the broader market these last 10 days than it has individual stocks because many stocks that look great are putting in failed break outs and they’re falling away at resistance levels, which tells me we’re probably range bound for the time being.
Everyone’s super bearish, everyone’s now expecting a race to the June lows and probably capitulation after that, but what if we’re simply just putting in a higher low after recently reaching an overbought market condition (a characteristic of an uptrend).
As most of you know by now, I like to steer away from the consensus mainstream media narrative. It’s what independent thinkers do. We look at the other side.
As the SPX chart shows above, we’re approaching a level to keep an eye on for some kind of rebound.
The US Dollar continues to climb, and if you’ve followed me a while, you’ll know I’ve been screaming this from the rooftops for 8 long months now.
The big question is, if the Dollar is going to hit my upside targets of $120, what does that mean for stocks?
Volatility and Credit Spreads
We’ve had a spike in the VIX over the last couple of weeks with Credit Spreads also moving, so another big question is how high do these 2 charts want to go?
Is this a “risk on” or “risk off” environment?
Just 2 questions to ask yourself.
Gold Miners
Take the gold miners for example. I put the above chart out on Twitter on Tuesday.
Last month I had a bullish position for a mean reversion “trade”
The chart become rangebound, I exited and it’s now breaking down.
So there’s opportunity in either direction, you probably just need to know where to look.
Conclusion
If you sat down and had a beer with me, I’d tell you my best guess is we chop sideways which for me, means risk defined, buy low, sell high.
But please let me be clear, there are areas of the market I’m bullish on and areas I’m bearish on.
For me, It’s not just a market of US Growth Tech Stocks.
Let the September shenanigans begin.
Conclusion
If you sat and had a beer with me, I’d tell you my best guess is we chop sideways which for me, means buy low, sell high.
Range bound charts like the above chart for CRM are the kind of charts I’m actively seeking out because risk is easy to define.
Let me be clear, there are areas of the market I’m bullish on and areas I’m bearish on. For me, It’s not just a market of US Growth Tech Stocks.
Let the September shenanigans begin. Having a game plan matters.