- Last 20 years: September ranks second to last in monthly performance with an average loss of 0.61%
- Last 20 years: The average daily trend peaks mid-month and finishes weaker
- Last 20 years: September is the second most volatile month only behind October
- Since 1950: September ranks last in monthly performance with an average loss of 0.51%
- Since 1950: September is the fourth most volatile month and is only higher 44.78% of the time which is the worst probability of any month
- Since 1950: If the S&P is up for the year and August is positive, September has an average loss of 0.17%
Jeff Hirsch of Trader's Almanac has some interesting commentary about month-end:
"Although the month has opened strong 13 of the last 22 years, once tans begin to fade and the new school year begins, fund managers tend to clean house as the end of the third quarter approaches, causing some nasty selloffs near month-end over the years. Recent substantial declines occurred following the terrorist attacks in 2001 (Dow: -11.1%) and the collapse of Lehman Brothers in 2008 (Dow: -6.0%). Solid September gains in 2010; DJIA’s 7.7%, S&P 500’s 8.8% were the best since 1939, but the month suffered nearly the same magnitude declines in 2011, confirming that September can be a volatile month."
If we turn our attention to the technicals and sentiment we can start to paint a clearer picture. While we remain bullish overall we have continued to be tactically cautious in the back half of summer and into September. With some cash on the sidelines and maintaining our core positions, our patience has been rewarded as the S&P has stalled since mid-July while experiencing the largest intra-year drawdown of 2.9% during August.
One thing we are monitoring is the negative divergence in breadth as the S&P consolidates. The leadership has narrowed and for the market to sustain new highs it will need to be accompanied by a fresh bout of momentum. In what has been a most unloved bull market, the S&P has now had the second longest streak without a 5% pullback since the 90's. It has been 209 days since the last 5% fall and has blown past the streak set during 2014's strong uptrend. With 2017's biggest pullback being just 2.9% so far it seems the S&P will experience a larger drop considering the average intra-year decline is 14%.