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September Ends Crucial Seasonality Test With Passing Grades for the S&P 500 (+0.43%)

September seasonality is typically unkind to market participants, however, in 2017 and 2018 the tendency fell short, markets finished higher. Sales and earnings buoyed the equity markets this year as companies projected more bullish sentiment. Looking forward, we can anticipate the fall and winter months to be kind, as a statistical edge goes to the bulls during the seasonally strongest months of the year.

September Seasonality versus October and November

The graphic below illustrates seasonality very clearly. S&P 500 performance over the past 5 years excels into October and November. This year September beat the odds, with passing grades.


SPX Seasonality 5 years


My disposition is to look forward to October and November, as these months will undoubtedly lead to more bullish conditions. Fund managers need to beat the S&P 500 benchmark if they want a bonus check.

SPX Monthly – Seasonality Strong 2017 ~ 2018

With one trading day left, the S&P 500 closed Thursday (+0.43%). The trend is bullish.

Since we do not trade with an opinion as our guide, we will focus on price and volume. Speaking of volume, look at the volume graph in the chart below.

2017 denotes one red bar, whereas 2018 has but two bearish volume bars to end the quarter. To put it another way, 2017 saw 11 out of 12 months with overwhelming demand. Betting on a market pullback was futile.


SPX Monthly


S&P 500 – September 2018 Seasonality

The 20/50/200d are trending, and bullish. MACD is above its signal line. Volume has been bullish 7 out of 9 months, as we ease into October and November. Which do you prefer to focus on?

Given the fact that the S&P 500 is on track to finish the month in the bullish column, we would discard bearish thoughts and focus instead on what is to come.

Seasonality and the Put Call Ratio

Put Call ratio is suggesting the trend is intact when it remains in the zone between 0.95 and 1.05. Each dip into the red zone saw more calls trading, whereas each spike into the green zone saw markets bounce as put buyers signaled fear. In other words, we look to do the opposite at extremes as go with the trend when put call is near 1.00.


CPC Put Call Ratio


Dow Jones futures fell 0.2% vs. fair value. S&P 500 futures dipped 0.2% while NDX futures lost 0.3%.

The euro fell sharply Friday morning as traders dumped Italian stocks and bonds. Italy’s main stock index retreated 3.8%. The left- and right-wing populist coalition government decided to hike its budget deficit beyond European Union limits, setting up a standoff with Brussels. Stocks also retreated in Germany, France and the U.K.

Remember that Dow futures, Tesla stock and other overnight action don’t necessarily translate into actual trading in the next regular session. – Source Investors Business Daily

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Happy Trading,


P.S. We will sit on our hands this morning. Sometimes doing nothing is a strategy worth embracing.


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