MackTheKnife's Blog : September Is the Cruellest Month?

Mack,

From what I can tell, the worst months for September occurred in years where the market was down YTD going into September. Typically, there would be pretty good numbers of new 52 week lows going in as well.

I am reminded of a year where the market topped in September, notably 1929, (also 1987 was a down September with the top in August). But best I can tell from the recent record, September hasn't been frequently associated with market tops. What say you? Given we are up YTD? Is there any statistical distinction between years where the market is down January thru August?

Howdy, TB!

Is there any statistical distinction between years where the market is down January thru August?

Good question.

In my attempt to determine the seasonal trendencies of the S&P 500 based on the data associated with the 59 years between 1950 and 2008, inclusive, I found there were 41 years (69.49%) when the index moved higher from January to August and 18 years (30.51%) when it moved lower during the same period.

In the 41 years when SPX rose over the first eight months, it rose in September 19 times (46.34%), was flat in September once (2.44%), and fell in September 21 times (51.22%).

In the 18 years when SPX fell over the first eight months, it rose in September six times (33.33%) and fell in September 12 times (66.67%).

Accordingly, I believe it would be fair to say September is a pretty lousy month under both conditions, but it is more lousy in years when the S&P 500 has fallen during the preceding eight months and less lousy in years when the index has risen during the preceding eight months.

Good luck!

MackTheKnife

Also on the September Swoon

Dont Count on Market Momentum to Help Avoid September Potholes at WSJ.com (http://tinyurl.com/moxpxk)

If the January indicator is correct, we should close the year at a loss (S&P below 830). If the "sell in May, and go away" indicator is correct then we should close Labor Day below 900 (S&P 500). S&P is now at 1020. I bet that this year we will be statistically correct in whatever level we close. ;)

I'm actually impressed with the way the compooterized trading desk at GS (which is "obviously" being run by kidz fresh outta Harvard n Yale whilst the BIGGUNS finish up vacationing in the Cramped-ins out on Lonk Island) is getting everythang purrfectly setup for whenst the BIGGUNS get back. Every single index...the SPX, NAZ, INDU, XOI, HUI, HGX etc etc will be topped out at purt near the EXACT same time. Do you know how hard it is to do that?!! :-) Well, I'm wreckin it's not that hard whenst you are in control o'the muny. :-) 3J

Howdy, 1J!

If the January indicator is correct, we should close the year at a loss (S&P below 830). If the "sell in May, and go away" indicator is correct then we should close Labor Day below 900 (S&P 500). S&P is now at 1020. I bet that this year we will be statistically correct in whatever level we close. ;)

Based on my study of S&P 500 data associated with the 59 years between 1950 and 2008, I am impressed with neither the January Indicator nor the Halloween Indicator, as described in The Halloween Indicator, 'Sell in May and Go Away': Another Puzzle (http://tinyurl.com/6e4tl).

Regarding the January Indicator, I found there were 35 years (59.32%) when the S&P 500 moved higher in January and 24 years (40.68%) when the index moved lower during the same month.

In the 35 years when SPX rose in January, it rose 32 times (91.43%) and fell three times (8.57%) the rest of the year. Ergo, the January Indicator in a year such as 2007 appeared to have steered equity-market participants in the right direction.

In the 24 years when SPX fell in January, it rose 12 times (50.00%) and fell 12 times (50.00%) the rest of the year. Therefore, the January Indicator in a year such as 2009 is about as good as a coin flip, except the coin may have real value in the current deflationary environment.

Regarding the Halloween Indicator, I discussed my findings at length in the "Comments" (http://tinyurl.com/mqt9gl) under my above-linked September Is the Cruellest Month.

Good luck!

2J (Alias MackTheKnife)

Thanks 2J.
Perhaps the Halloween indicator is caused by the lack of institutional buying which is overshadowed by stops getting hit with retail investors while the period after Halloween is buoyed by end of the year bonuses, tax returns and new year rotation into equities. What would you say would be the cause of a down September?

Howdy, 3J!

Every single index...the SPX, NAZ, INDU, XOI, HUI, HGX etc etc will be topped out at purt near the EXACT same time.

Based on the equity-market action today, this would appear to be an unlikely scenario.

Good luck!

MackTheKnife

Howdy, 1J!

What would you say would be the cause of a down September?

I am unaware of any convincing explanations for the persistence and robustness of the data underlying the September Swoon, although I have come across unconvincing ones such as those mentioned by Mark Hulbert in the above-linked article.

The September Swoon: It is. Therefore, it is.

Good luck!

MackTheKnife

"(which is "obviously" being run by kidz fresh outta Harvard n Yale whilst the BIGGUNS finish up vacationing in the Cramped-ins out on Lonk Island) is getting everythang purrfectly setup for whenst the BIGGUNS get back. Every single index...the SPX, NAZ, INDU, XOI, HUI, HGX etc etc will be topped out at purt near the EXACT same time. Do you know how hard it is to do that?!! :-) "

3J, all you have to do is set a buy order at 7777 on the Dow this time to match the 666 bottom on the S&P in March. then it bcomes an Obamba the savior rally! ;)

Oh I'm not finished yet Mack. Twas gettin close but I "guess" Mighty Mouth got on the CHL hotline to Big Daddy and they both decided to panic. I got a little estree werk to do over the next few days than I had expected. But I'm purty sho I can get er duuuunn by Fri. Any purrticular time o'day that would be best for you whenst I shud top everythang out at the same time? I'm trying to make this as convenient as possibull. *-) 3J

Actually, CJC, I mentioned the VXX 56.66 low whenst it happend. The DOW woana make it to 7777 no way no how. But I'm stronger than dirt....so I'm wreckin VXX 56.66 won't be too much of a task. *-) 3J

Mack, I see the airlines are falling in conjunction with Earl falling....which makes purrfect sense cuz as everybody knows....high Earl prices are GOOG for the airlines. *-) I'm wreckin you could even prove that with somma yer fine research. Anyhoo, I'm "expecting" USO to trade back up thru $38 dallahs and whenst Earl rallies it is "obviously" gonna be GOOG for the airlines. No biggie....just wanted ta give ya the heads up. *-) 3J

Well Mack,

I guess you got everyone worked into frenzy :-).

I bought the weakness and had to give up. Its been a good rally And I'm keeping the gains I have :-). If this marks the top, then this would be the first time I've have ever seen a bull market tip over with a 10 day average of 52 week lows of less than two. Practically no divergence. I suppose a bear market rally could do that even one with an age of 6 months.

Alot of stocks seem to be hitting resistance at the 24-month moving average.

Soooo, TB, you "buyin the pullback" in EGY? :o I can rexscue it...but ifn my request for beer from ya wuz axin too much and ya just bailed insted well....I could unnerstand that too. This EGY trade wiped out all of yer little piddly gains ya made by buying FAS in PM trading and banking the 20 centavos gain on the open fer yer $5000 inbestment the past mumph...ass-ooming you inbest the same amount of $$$ in each of yer trades of course. :o I can see where's ya "might" be too discouraged to even bother mit sending "rexscue beer" at this point. >>> :-( 3J

Nope 3J,

I was over 50% cash and I bought FAS of all things. I set my program to sell if an hourly close below 74. That got me 73.56. I was gone when it happened and came back about 30 minutes before the close. I guess you'd been working very hard :-). Too bad I didn't set it to go long FAZ. I'm giving this a rest, I'll get back to it maybe Thursday but probably next week. The last 6 months have been very generous to me. I don't want to screw that up by being adversely positioned. I'm much lighter exposed now. Looks too late to go short and too early too go long so I'm going take some time to enjoy the fruits of my labors.

TB, foist off I want you to unnerstand that the reason I am ribbin ya is just so you will feel what it is like on "the udder" side. :-) I'm sho you will remember how you continuously ridiculed me even tho you never took the time to actually research my actual FAZoo calls. My whole point about pressing you on EGY was to get a "real time" call out of you for the very first time. I'm sho you are finding that this is a veeeery difficult market to "call on the fly" *-) My suggestion to you is that you do eggZack'sly what you said you are going to do....step away from the markets until I have thangs in complete control. I know it gets frustrating whenst you have a rally in the indicies of 50%+ and you haven't been able to capitalize cuz you bot the wrong stocks as you did this entire time. No one can deny that I set the bottom in the gold stox and several udders too. Tain't no way no how I would have ridden them to these heights. NE1 who tells you they have is an outright fraud. So yes...not being thur for the BIG gains is frustrating. But like I said many times ba ba bafo...Thurs ALWAYS sumphin *-) Anyhoo, the markets are going to get even more difficult to guage over the next several daze. I promise...whenst I am finished with the indicies I will let you know. That way you will be able to relax and enjoy all of the excesses that now need to be unwound without worrying about getting in too soon or too late. Remember>>> Werry-free inbesting :-) 3J

Howdy, TB!

If this marks the top, then this would be the first time I've have ever seen a bull market tip over with a 10 day average of 52 week lows of less than two. Practically no divergence.

Personally, I interpret the 1,039.47 level attained by the S&P 500 on Aug 28 not as a long-term top but as a short-term top. If Mr. Market continues to carry out the current consolidation or correction, then I believe the above-referenced level could be surpassed within the next month or two (i.e., I think the little manic-depressive has chosen rationality over irrationality, at least for the moment).

Good luck!

MackTheKnife