3 Can't-Miss Charts for "Scary September" Trading

Iulie 08, 2016 05:00

Welcome to September — a horror show of losses for stock markets throughout recorded history. Statistically, we're entering the worst trading month of the year. And with a jam-packed calendar, no asset class is immune from potential event risk and volatility.

The first debate of the U.S. presidential campaign. A group of major central bank interest rate announcement nearly every other trading day. And a key meeting among commodity nations around the world.

That's not to mention that the month has typically been the worst one for stocks — the only one in which the median return for the #SP500 has been negative going back to 1928...

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Source: Bloomberg

And #Gold is confirming the stats...warning of an end to the unusual calm that's characterized markets in August, indicating investors may go long volatility, due to the prospect of rising cross-asset correlations (check Correlation Matrix and Correlation Trader for daily and weekly market correlations).

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Source: Bloomberg

Of course, there's no guarantee this volatility will soon materialize (stay connected to daily market volatility with Heat Map).

But, The Federal Reserve is primed to re-start tightening the Federal Funds Rate.

Everyone and their uncle now expect that the Janet & Co. will resume tightening interest rate in the next 4 months. Chances are that it won't happen in September (~21% probability, down with 3% after last NFP release) but there is very high probability (~80%) that a December hike will happen (don t miss our dedicated webinars).

Higher interest rates are generally negative for equities since higher interest rates tend to have a negative impact on business profits and consumer spending.

Given this sentiment (we have no good reason for being a contrarian on this one), investors may start thinking how can one make some "beer money" out of this. If interest rates do go up, then maybe financial stocks (particularly insurance companies and banks which depend on interest rate spreads) would benefit but the rest of the market does face some risk between now and the end of the year, though mostly because of valuation and technically the market does need some "excuse" to sell off, and let off some steam.

One of the best "excuse" these days is the SP500 'squared price and time'.

So far we are seeing a possible topping pattern within this 360 days from end of Aug 2015 low with 360 points range and 180 days from Feb 2016 low with same 360 points range.

From time and price perspective, is the highest probability for a top. Or it could be a 90 days exhaustion move up started on June 28 to complete the trend. In this case, the end of Sep is the best time to complete the leg up, at a price around 1990 + 360 points = 2350 for SP500.

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Source: Admiral Markets - Web Trader

In sum: vacation's over. Before volatility it's here, it's on the Admiral Markets Supreme Edition platform. LEARN MORE

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