Today, almost exactly one year after U.S. stocks’ temporary bottom – lessons learned


If you are a trader who believes only in seasonality, then today is the day to buy stocks. There is a decline and September ends on a weak note. Sure it looks bad right now, but it always looks like that when emotions are bad.

As a reminder, just go back a year to when the market first bottomed out on September 30th. It then retested in the second week of October, where it dropped on an intraday basis, followed by a rally that confused you. Despite reporting a higher CPI. The ForexLive report for the day is worth reading.

From then on, not much improved by the end of the year, but shares rose as much as 10% before tax-loss selling ended the quarter up 5%. This decline in tax losses was a huge opportunity as there was a one-way rise in early 2023.

Like most of this year’s trading, it all roughly followed the seasonal pattern. At the beginning of this week, I emphasized how the years of strong gains followed by weak Septembers are behind us. Always There were good endings.

Here’s a nice view of the seasonal pattern:

Seasonality on Nasdaq is even stronger in the fourth quarter.

“Volatility may remain seasonally high through the first week and a half of October on average, but this is the time period when stocks tend to bottom after the third-quarter reset,” EquityClock notes, so there’s no rush to buy today.

It takes some courage to buy a stock after weeks of selling, but it’s certainly no worse than last year, when the market was eyeing an impending 75 basis point increase followed by a series of promised increases in 2023. Of course, valuations are more challenging, but in a bull market there is always a wall of anxiety to overcome.

What needs to happen is some kind of bid in bonds or softening in economic data. The latter may be nearly impossible to achieve, as a government shutdown on Monday now appears near certainty.

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