charts: September Stock Market

Courtesy of thepatternsite.com

Courtesy of thepatternsite.com

Possible Explanation By Investopedia
Since 1950, the month of September has seen an average decline in the Dow Jones Industrial Average (DJIA) of 1.1%, while the S&P 500 has averaged a 0.7% decline during September. Since the Nasdaq was first established in in 1971, its composite index has fallen an average of 1% during September trading. This is, of course, only an average exhibited over many years, and September is certainly not the worst month of stock-market trading every year.
There are several theories which attempt to explain this phenomenon. One particular theory points to the fact the summer months usually offer light trading volumes on the stock market, as a good deal of investors typically take vacation time and refrain from selling stocks from their portfolio. Once fall begins these investors typically return to work and exit positions they had been planning on selling. When this occurs, the market experiences increased selling pressure, and thus an overall decline.
*As well, many mutual funds experience their fiscal yearend in September. Mutual fund managers, on average, typically sell losing positions before year end, and this trend is another possible explanation for the market's poor performance during September.

Data from moneychimp.com

            Yrs  Yrs  Avg

Month  Up  Dn   Gain/Loss

Jan        39   26   +0.94%

Feb       37   28    -0.13%

Mar       42   23   +1.10%

Apr       44   21   +1.36%

May      37   28   +0.11%

Jun       33   32    -0.07%

Jul        35   30   +0.83%

Aug     37   28    -0.18%

Sep     29   36     -0.65%

Oct     40   25     +0.68%

Nov    43   22     +1.37%

Dec    49   16     +1.59%

The data above supports that September is the worst month of the year and that the best six months of the year is November to April.

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Past performance is not indicative of future results

charts:Tom DeMark Warning

TOM DEMARK WARNS: Chinese stocks are following the path of the Dow in 1929

While China’s stock market suffered one of the largest declines on record yesterday, we ain’t seen nothing yet, according to the man who predicted the low point for the Shanghai Composite index in 2013.
Tom DeMark, founder Arizona-based DeMark Analytics, believes there’s significant carnage still to come.
He’s predicting China’s stock market will decline by an additional 14% over the next three weeks as the market demonstrates a trading pattern that mimics that of the 1929 US crash, according to a report from Bloomberg.
DeMark suggests the benchmark Shanghai Composite index will sink to 3,200 points in the weeks ahead, extending the decline from the June 12 peak to 38%.

 

The premise of his call is that “the gauge’s moves since March are tracking those of the Dow Jones Industrial Average in 1929 when the gauge lost as much as 48%”. Despite the threat of government intervention undermining his call, DeMark believes his market indicators are most effective when the market is “manipulated”.
“Lip service and intervention like that — it’s false,” said DeMark, adding “there’s a certain way in which the market unfolds. The only thing the government could do is to postpone it.”
DeMark believes that despite renewed talk from the CSRC, China’s stock market regulator, that they will step up efforts to underpin the market, the increased intervention won’t be enough to sustain the 16% rally seen since the index bottomed earlier this month.
“Markets bottom on bad news, not good news. You want to have the last seller sell. We got good news at the recent low. The rally is artificial,” he said.

See the comparative charts for yourself...

DJIA up to October 16,1929, Courtesy of Worden Bros

Current Shanghia 2015 chart, Courtesy of Worden Bros

Now see what happened subsequent to October 16,1929 for the DJIA...

DJIA 1929 chart, Courtesy of Worden Bros

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Past performance is not indicative of future results

Fear Greed Index 2012-15 vs DJIA

Courtesy of eSignal & CNN

Top chart is the DJIA and the bottom chart is the Fear & Greed Index from mid 2012 to July 2015.
There is an interesting correlation between these two charts.

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Fear Greed Index

Courtesy of CNN

This chart is from Monday July 27,2016 at 11:00 AM

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McClellan Summation Index

Chart Courtesy of Worden Bros.

Note the positive divergence in the chart above.
Lower tops in the Summation Index while there are recent rising bottoms in the histogram in the lower window.
This together with the Fear & Greed Index of 9 posted on July 24,2015 is a recipe for a bounce.
A dead cat bounce or a real turn around rally?  This can be determined once a bounce occurs.

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Fear & Greed Index

Courtesy of CNN

Index is as of the close on Friday July 24, 2015

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Fear Greed Index

Courtesy of CNN

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DIA & SPY daily charts

Chart Courtesy of Chaikin Analytics

Chart Courtesy of Chaikin Analytics

The above charts are very informative when reviewing market trend.   It does give you an edge in determining the ability of the market to continue a trend or not to continue a trend.

Important areas to review on these ETF charts:
Power Gauge - not available on these ETFs
Price bars above or below the gold moving average (MA)
Chaikin Money Flow (CMF)
Overbought/Oversold (OBOS)
Relative Strength (RS)

What is very interesting is that both charts give the same hints at the July 20th high.
During the rally from the July 7th bottom the price bars could not generate enough momentum to get above Chaikin's proprietary gold MA and was stopped just below it.
CMF could not get out of the red area and get into the green area above zero while the OBOS indicator went from OS to OB.  This was a hint that the market rally may not hold up.
RS during this rally also could not get out of the red area and go into the green area.
Technicals / Trends = weak


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SSO 60min chart

                               This chart is courtesy of TradeStation
                               SSO 60min char from 6/5/15 - 7/24/15 

Top window - SSO 60min chart with moving averages (MA)
Middle window - White line is the volatility (high=high volatility & low=low volatility)
Bottom window - Oscillator cross over equals buy and sell signals & histogram follows in the same way

Notice that when there is low volatility the price is generally consolidating and following that consolidation the market breaks out of that consolidation.
Another way to watch this is to draw trendlines on the top and the bottom of the consolidation period.  Wait for price to break out and confirmed by the cross over of the MA's and oscillator cross over buy and sell signals.


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Short Term Update

The following was posted on July 8,2015
Todays comments are in BOLD

June 30 to July 8 & may be to July 13 & possible to July 20th - cycles suggest a potential consolidation period with a possible bias to the upside.   
As of today this has been accurate, a sideways trend (actually since the beginning of the year) with a high on July 20th.

Short term details:(every date is +/-)
July 17-20 high   high was made on July 20th
July 23-29 low    On time so far  
Aug 4 high
Aug 8 low
Aug 13 high


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CNN Fear/Greed Index

CNN fear and greed index

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SPY weekly chart with REI

The following chart is the weekly SPY.  Below is the REI (range expansion index by Tom DeMark)

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Past performance is not indicative of future results

Short Term Update

The following was posted on June 29,2015
Todays comments are in BOLD

June 30 to July 8 & may be to July 13 & possible to July 20th - cycles suggest a potential consolidation period with a possible bias to the upside.  As of today this has been accurate, a sideways trend with a high on July 7th.



Short term details:(every date is +/-)
July 7-8 high
July 10 low
July 13 high
July 16 low
July 17-20 high
July 23-29 low


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SPY monthly chart

The SPY monthly chart above is courtesy of eSignal

There are three Andrews pitch forks on this chart.  Note when the trend changed and when the last trend line is broken in the direction of the change in trend.  We are currently sitting on the bottom trend line. 

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Short Term Update

Short Term - the following has been suggested for many weeks in this blog
June 18-19 - poss top - high occurred on June 18th 

June 26 - possible low - Low so far occurred on June 29th - Note that this blog recently wrote "It is possible that Friday's volatility "might" carryover to Monday.  Monday's on many occasions have inherited Friday's volatility.", and this happened again today.

June 30 to July 8 & may be to July 13  - cycles suggest a potential consolidation period with a possible bias to the upside.

July 23-29 - possible low


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Short Term Update

Today on Twitter there was a chart by SeeItMarket.com on the 7th year of the Presidential cycle (this occurs when a President serves two terms).  In addition, their link takes you to an article which included another chart on the 3rd year of the Presidential cycle.  Both the 7th year and the 3rd year of the Presidential cycles fall in this year, 2015.
Here are those charts.

courtesy of SeeItMarket.com

Both of these charts show a rough several months just ahead before a year end rally.  Of course, both of these charts are the "averages" of several 3rd and 7th years.

Now to take a look at the short term and intermediate term cycles.  Both suggest some volatility in the months ahead much like the two charts above suggest. 

Short Term - the following has been suggested for many weeks in this blog, but, it also is similar to the 3rd year Presidential chart above 
June 19 - possible high
June 26 - possible low
June 26 to July 8-13  - cycles suggest a potential consolidation period
July 29 - possible low

Intermediate Term - The following is also similar to the 7 year Presidential chart above
June, July, August - high
September, October - low

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Short Term Update

After the cycles suggested an move up into June 10th the forecast was for some consolidation or pullback into June 11-12 +/-, which came as forecast.

It is possible that today's volatility "might" carryover to Monday.
Monday's on many occasions have inherited Friday's volatility. 

ZACKS on Monday Volatility
Monday volatility captures most observers' votes, as it follows two days of market inactivity. Many corporations make earnings and operations announcements after the Friday market close to mitigate the stock price effects of major public or shareholder information. The two-day inactivity period, regardless of major announcements, alone also contributes to increased investor activity, generating more volatility and trades. Weekend announcements of earnings, executive changes, mergers and acquisitions further increase volatility and activity.

JustSignals comments
Another observation has been that the market direction for the rest of the week, sometimes, has been in the opposite direction as that weeks Monday.  So, if Monday opens down or is down for the day, then one "might" expect the market to move up by the end of the week.  One explanation for this is that after a weak Friday weak hands are selling on Monday while the strong hands are buying and then take the market higher by then end of the week.

This scenario would fall in line with the current short term cycles view for some more upside into June 18-19 +/-.
  
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AAII Bullish %

Aubie Baltin CFA, CTA, CFP, PhD. and writer of the market newsletter, UNCOMMON COMMON SENSE,  once wrote that the stock market tends to rally for approx 3-6 months when the AAII bullish reading is under 25.

Recent dates when the AAII Bullish % was less than 25.00
June 9,2011    24.40  - Sell off into Aug 2011 before continuing higher
May 16,2012  23.60  - Market continued higher
July 18,2012   22.20  - Market continued higher
April 10,2013 19.30  - Market continued higher
June 10,2015  20.00  - ???

JustSignals posts for the intermediate cycles have been suggesting:
The intermediate forecast is for a top either on May 21+/- and or June 18-19+/- with a potential correction into July 29+/-.  The cycles then forecast a rally into November and or January.

So, similar action subsequent to June 9,2011 is a good possibility at this point based on the suggestions of the intermediate cycles and Aubie Baltin's interpretation of the AAII Bullish %.

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Past performance is not indicative of future results

Short Term Update

Excerpts from original post on June 3,2015   

Today's comments, June 10th,  are in BLUE

The cycles have been performing well, but, what do they expect between today, June 3rd, and June 18-19? 

Today's Comments June 3rd
Today the cycles are suggesting some grinding up into June 10 +/-.
Although the short term cycles did not get closer to the June 3 +/- forecasted bottom, the market did bottom a few trading days later on June 9th.   The originally forecast grinding up from June 3 +/- ended up being a one day thrust up, catch up,  into the June 10th forecast date today.
Then some consolidation or pullback into June 11-12 +/- with the market trying to add some more to the upside into June 18-19 +/-.



June 18-19   poss top - From here the cycles suggest a bias up into June 18-19+/-.  Since June 19th is a Friday it may include Monday June 22nd so watch your indicators for evidence of a trend change.

July 29   poss low - more on this as we approach June 18-19


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Intermediate Term Update

Originally posted on
Friday, April 24, 2015

The intermediate forecast is for a top either on May 21+/- and or June 18-19+/- with a potential correction into July 29+/-.  The cycles then forecast a rally into November and or January.
Keep checking for further updates.

June 9,2015 Comments
So far this has been the case for the intermediate term.  The short term cycles missed the June 3 +/- low.  That forecast low did carryover several days.  The cycles are still suggesting some upside into June 18-19 +/-.  As always, watch your indicators for evidence of a trend change and JustSignals for more updates.



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Past performance is not indicative of future results