News -Trade Desk Thoughts: September Blow-Out Top

As has been previously reported in recent LFB headlines, the month of September equity trade is 50/50 at best in regard to ending in the green. “The Stock Market handbook goes back to the time that dirt was young, and records September as a poor month in equities” TheLFB Trade Team said. “$1000 invested just in September since 1919 was worth $800 in the year 2000, and interestingly, the first week or so is not so bad, it is weeks three and four that have done the damage” they added.

At this time the Japanese fiscal half year-ends, (September is the final month of Japan’s fiscal first half), and is when Japanese corporations have accounting incentives to repatriate funds back to Japan from overseas investment. This is also the time of year that the U.S. Mutual Fund year end on October 31^st comes into focus. “Outside of historical trends, we start to see reasons behind the pattern of trade” TheLFB Trade team said.

“The fact that we go into September at yearly highs may help in regard to forward momentum, but the moment greed is replaced with fear of loss, the automated sell button tends to get jammed down.”

There is nothing that a 95% automated trading environment likes more than to overshoot a target, just for good measure, and with liquidity still being kept in very tight circles, there is a high probability chance that a blow-out reversal day is coming. “Hopefully it will be a one-off, and things quickly stabilize.” They added.

The dollar index is extremely oversold, on most time-frames, and the near-term sentiment and momentum reads on the S&P futures, oil, and gold markets are all signaling a blow-out top could be here. If so, Aud/Usd looks vulnerable, as does Gbp/Usd; one due to interest rate differentials losing their appeal in times of risk aversion, the other due to a complete lack of forward economic clarity from the U.K. administration.