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Wake Me Up When September Ends

When September ends (2).jpg

We've all likely heard the Greenday classic, and you might be asking yourself as you're reading this - what's the deal with September?... was the song written about the Stock Market? Did lead singer Billy Joe Armstrong write this song to warn traders  about the dangers of September? Is he sending a secret message into the future, so that future generations can learn from the mistakes of the present?

Of course the answer to all of those questions is no, but hopefully by the time you read this 2 minute blog, I'll l have given you a little insight into how seasonal patterns keep replicating year after year after year, and how this seasonal pattern holds true for September more often than not.

Firstly, seasonal trends DON'T always show themselves to be true.

Secondly, we must always understand that we can only react to price when we are faced with negative market conditions, and by having an understanding that seasonal trends are very real, we can approach the markets with a little more confidence, we can determine our risk tolerance in advance and also look to maximize profits in the face of any potential short term decline.

In the same way that Technical Analysis is used as a supplement to price, we must acknowledge that seasonal trends should also be used a supplement to price because the seasons only prove themselves to be true a certain percentage of the time, which simply means that some years they are proven correct, and some years incorrect - we must never base seasonal trading decisions on assumption, but rather use seasonal trends in anticipation.

It wouldn't take doctorate in Nuclear Physics to understand that managing existing positions a little more closely would be considered prudent, and leaving your money dangling in the wind would be rather negligent - you simply must manage positions.

We've likely all heard of the Stock Market Xmas Bonus... where we usually get a huge run up in the stock Market either just before Xmas or just after... welllllllllllll .... to the other end of that, unfortunately, we also have certain months of the year where we can anticipate declines, and September is a month where this  occurs more often than not.

To steal some verbatim from the Internet -

"Since the Dow Jones Industrial Average was created in the late 1890s, September has produced an average loss of 1.1%. The 11 other months of the calendar, in contrast, have produced an average gain of 0.8%"

This is a rather staggering reality and 1 in which there are many schools of thought... ranging from Mutual Funds selling off prior to the end of the Fiscal Year.... to parents selling stocks to pay for their kids school tuition etc - whatever the reason is... we know the stock market declines in the Month of September more often than it increases - and we need to be aware of it.

There are 2 actions that you can take

1. You can manage manage existing trades a little closer and look to maximize profits in case we see a downturn (we didn't see 1 last year)

2. You can sit on cash... wait on the sidelines like a sniper - and hoover up as many good quality discounts (provided there is supporting Technical Analysis) in the face of a September decline.

The goal of this blog post... isn't to bombard you with statistics and numbers, or to scare you ... it's simply to make you aware that the Stock Market gives us valuable statistical information for the month of September, and in my opinion - it's information that should be considered in its fullest to enable the best decisions to be made.

What could be a potential catalyst? Trump? Trade Wars? Emerging Markets? Economy?

Quite simply - it doesn't matter what the news headlines say, and one thing is for sure though ... the media like to sensationalize in pursuit of getting website click on and they'll attempt to blame any drops in the Market on 1 particular source... but the truth is - these drops in September have been occurring since date dot - so if we see headlines - take them with a pinch of salt, and understand the short term news / short term impact dynamic of the market. Price will do what price wants to do, and it's for this exact reason that I pay VERY little attention to the news, price tells me what is happening and my Goals for September? Just the same as every month really!

Goal number 1 - Don't lose money

Goal number 2 - Maximize profits 

Is September a rocky month? History tells us yes... but this doesn't mean we should freak out and sell all our positions (if you did that last year - you would have regretted your decision), it simply

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Sam McCallumComment