Trader’s Narrative

Here is another look at the historic weakness in September:

While the previous chart I shared with you showed the percentage of times that the index (Dow Jones Industrial) rose in September: “Why You Should Write Off September“; this chart shows the average performance in the various months.

Not surprisingly, the two charts are similar. The best returns are clumped towards the end of the year. I’d like to see a EMH die-hard try to explain the pattern away

Surprisingly, April is also a good month - the best month in fact.

So you can sidestep the whole month, or learn to love it and short, as Tim suggested. I don’t pretend to have a crystal ball which tells me the future but when you combine the headwinds of historical monthly performance with the technical picture and the current stock market sentiment, things don’t look too good for this month.

On average, most of the annual returns in the stock market come from the last few months plus January. This goes by the name of the January effect and other labels.

But so far this year, we haven’t really seen the stock market follow this script. Who knows, with all this oversold technical situation, maybe it will start behaving and kick things into gear.

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Source: Jason Goepfert’s SentimenTrader.com