How Do You Spell September? U-G-L-Y

September is historically the worst performing month for stocks by a wide margin. (1) And it’s not looking good for this September either. The NASDAQ barreled through support at the 50-day moving average like a bull through a bullfighter’s red cape.

Ole’!

A rally that stops below the previous high that is followed by a lower cycle-low is the definition of a downtrend. It sure looks like Wall Street intends on testing mid-June’s lows.

However, stocks could get some juice in the not-so-distant future. The NASDAQ’s Relative Strength Index (RSI) is only a few points from 30 and entering oversold territory. If/when the NASDAQ gets some legs, the 50-day average probably won’t repeat its ole’ act on the way up. Instead, the benchmark trendline will likely act as a lid, put a higher on pause, and attract sellers.

That means investors might think about selling lagging performers into strength to build cash and then reallocating the Benjamins to leading stocks in leading industries.

Although things aren’t looking good, it’s too early to pound the table with sell, sell, sell. That’s because the NASDAQ is between its recent high of roughly 13,250 and low of roughly 10,500. That is a lot of points, we know.

However, the NASDAQ has multiple potential pivot points before flirting with ten-five. We’d feel awfully dumb yelling get out from the treetops, only to see prices move higher before an absolute technical sell signal. If/when the index closes below 10,500, then look out.

Ten thousand better hold as we believe going below five-figure could be a Leon Edwards kick to the head, a psychological knockout for investors. Then the NASDAQ would reenter Covid’s early 2020 valley. And scarily, there really isn’t a whole lot of support in that pit until 8,500ish. Ugh, we don’t even want to think about that. It’s nauseating.

For now, investors should remain calm, but vigilant. It’s the old cliché to be prepared for the worst and hope for the best.

SECTOR WATCH

There wasn’t any place to hide last week. Biotechs and US Broker-Dealers did the best, losing just 0.27% and 0.54% respectively. After that, every other sector and industry was down at least 1% with eight dropping at least 5%.

The naughty list included Marijuana, Computer Networking, Oil & Gas, AI, Semiconductors, Clean Energy, and Metals and Mining. The interesting thing about the list of poor performers is there is not a common theme. Sectors that cover multiple parts of the economy are getting whacked.

It’s an indiscriminate sell every and anything approach, which is worrisome.

STOCK WATCH

What is it the kids do when something is really/sarcastically funny, LOLOLOLOLOL, lots of laughing out louds. Yeah, that about sums up how we feel about adding any new individual stocks to the portfolio: NO CHANCE.

We’ll consider some short ideas, using inverse index exchange-traded funds (ETFs) if the NASDAQ breaks 10,500. It might be a while before adding new ideas to this section.

Rich Meyers
Investing Trends

 

1 – https://www.investopedia.com/ask/answers/06/septworstmonth.asp