The End of September…or Once More into the Fray

  • SumoMe

I have written often about seasonal trends in various financial markets.  I have highlighted many trends that have worked well over time – with the key words in that sentence being “over” and “time”.  Because, obviously nothing works all the time.  For example, historically the month of September has been very good for gold stocks and very bad for the stock market.  How’s that working out this time around?  So far, gold stocks are down about 9% since August 30th and the S&P 500 is up +3.3%.

So do we chalk it up as an “off year” for September seasonal trends in gold and stocks?  Maybe.  But then again, maybe not so fast.  Because both of these markets have previously exhibited something of a split personality during the month of September.  Let’s review.

Figure 1 displays the performance of gold stocks (using Fidelity Select Gold, ticker FSAGX as our benchmark) during two different periods.  The blue line represents the growth of $1,000 invested in gold stocks during just the first 8 trading days of September starting in 1989 and extending through the 8th trading day of September, 2013.  20130916-01

Figure 1 – Growth of $1,000 invested in gold stocks (ticker FSAGX) during the first 8 trading days of September (blue line) versus all other September days (red line) since 1989

For the record:

-The first 8 trading days of September has showed a gain only 14 out of 26 years, with a cumulative gain of +7.4% (which works out to an average gain of +0.86%).

Trading days 9 through 21 of September has showed a gain 17 out of 25 years, with a cumulative gain of +167% (an average gain of +4.52%).

So I am not giving up on gold stocks in September just yet.

As for stocks, as I wrote about here (http://tinyurl.com/mtez9cw) the stock market has displayed a strong tendency to decline after the 11th trading day of September (Tuesday, Sep. 17 this year) through the end of the month.  So with QQQ breaking out to new highs as I write, it comes down to this: if the market fails to sustain the breakout above last week’s highs in the next several days, no one should be surprised to see the market decline into the end of the month.

When you also factor in anecdotal “things” like the Fed scheduled to “speak” about tapering and a bull appearing on the cover of Time magazine (que the scary shower scene music)  a little bit of hedging (with put index options or VXX call options) would appear to be in order if the market drops back below the highs of the week ending 9/13/13.

Jay Kaeppel

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