September was the 1st losing month for Wall Street since a recovery rally began in on 23 March.
Market history suggests that September, historically the worst performing month of the year for US stocks, could be followed by the indexes outperforming in October, that rank as the 2nd-worst month of the year.
Wednesday, the DJIA ended September with a decliner of 2.3%, the S&P 500 index fell by 3.9% and the NAS Comp marked a decliner of 5.2%.
The last time any of those main benchmarks posted as bad a September performance was Y 2011, during the European sovereign debt crisis and the downgrade of America’s pristine triple-A credit rating by Standard & Poor’s.
Now, the Dow Jones Market data suggests that the September losses, does not have to translate into more losses this October.
The data says that the major indexes tend to rise in the following month 70% of the time after losses as severe as September this year, based on the last 10 frames in which the DJIA marked a decliner of at least 2%, the S&P 500 marked a September slide of at least 3.5%, and the NAS Comp logged a drop of at least 4.5%.
Overall, on a percentage basis, the S&P 500 and the DJIA have tended to fall on average in October.
Note,the relatively short data set is skewed to the low side by the punishing declines endured by the market in Y 2008, when the DJIA lost 14.1% in October of 2008, the S&P 500 dropped nearly 17% that month, and the NAS Comp fell almost 18%.
Those declines during the financial crisis dragged the overall Y 2008 performance for the DJIA lower, leaving an average loss for the month of October of about 1% and a relatively flat rest of the year at 0.05%.
Meanwhile, the S&P 500 has declines of 1.2% and declines of 2.3% for the rest of the year.
But, the NAS Comp tends to gain nearly 4% in the October trading frame on average and notch a 3.6% advance in the year to date, see chart below.
The Presidential election and the fear that stock prices are exceeding their earnings by increasing margins have triggered concerns of a possible shock to the system that could deliver a waterfall to Wall Street.
It appears to me that investors are hoping for a good October, and less-volatile trading frame in the lead-up to the 3 November elections.
Meanwhile, there is over $10-T on the sidelines, a strong V-shaped recovery off of the instant recession, and optimistic sentiment.
Have a healthy day, Keep the Faith!
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