Weekly Plan 9/17

Waiting for Jerome

Hello traders,

This week we have the all important FOMC and people expecting Jerome Powell and co. to do yet another skip on the rates.

We caught the excellent drop last week from 4545-65 range and now will wait until Powell for a larger directional move.

As we close out September, volatility seems to be coming back to the markets.

For daytraders, that is definitely a welcome sign.

Let us analyze what the next couple weeks hold for ES.

The History Lesson:

September is often considered the worst month for the stock market, and for good reason. Since 1950, the $SPX has posted an average monthly loss of 0.5%, compared to an average gain of 0.7% for all other months. But it gets worse. The last two weeks of September are particularly brutal, with an average decline of 1.7-2%. That’s right, more than half of the monthly loss occurs in the final fortnight.

Why is this the case? There are several possible explanations, such as tax-loss harvesting, seasonal shifts in consumer spending, and geopolitical events. But whatever the reason, the data shows a clear pattern: September is a tough month for the bulls, and the last two weeks are even tougher.

The Current Situation

So, how does this historical trend relate to the current market situation? Well, let’s take a look at what happened last Friday, September 15th. The $SPX closed at 4450.33 , down 1.22% from the previous day. The market breadth was also weak, with more than 80% of the stocks in the index closing lower.

What does this mean? It means that the market sentiment is turning bearish, and that the bulls are losing momentum. It also means that the historical trend of a September slump is starting to play out. A simple projection based on the average decline of 1.7-2% in the last two weeks of September would suggest a potential drop of 80-135 points on the $SPX by the end of the month. That would put the index below 4380, and erase most of the gains made since July.

The Bottom Line

Of course, history is not destiny, and past performance does not guarantee future results. Markets are influenced by many factors, such as earnings reports, economic data, policy decisions, and global events. There is always a chance that the bulls will defy the odds and rally in the final stretch of September.

But as investors, we should be aware of the historical trends and how they might affect our portfolio. We should also be cautious and vigilant, and not get complacent or overconfident. We should do our own research and analysis, and not rely on hearsay or hype.

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Moving on, Levels for this week: