September came in better than August, totaling +14.44% compared to the S&P 500’s 0.04% loss. This brings our monthly average for 2015 and 2016 to 16.45% versus SPX’s 0.31%.
With the S&P 500 having finally topped its 2015 highs and the critical 2138 Fib level, it was on a mission to hold its gains. There was very little in the way of positive economic or geopolitical news to justify it. As if that really mattered…
Central banks went back to the well with well-timed ramps in oil (26%, 11% and 12% starting on Aug 19, Sep 1 and Sep 20 respectively) and USDJPY (+4.8% between Aug 16 – Sep 2) to goose the algos whenever necessary.
And, the Fed rediscovered its fondness for VIX, repeatedly monkey-hammering the (former) risk indicator whenever stocks needed a little help. The drop from the post-Brexit 26.72 to 11.02 in early August was one of the steepest declines ever. Having been so successful in staving off Armageddon, VIX was utilized frequently to prop up SPX.
This sometimes left us twisting in the wind during August and September. I’d see SPX break down through support towards a perfectly logical downside target and recommend a short position, only to see VIX suddenly plunge by 20-30 cents — sending SPX higher or, at least delaying its decline. Trade advices were affected a whopping 27 times last month.
It happened most often at the end of the day — the purpose being to make bears think twice about staying short overnight. After being suckered into it a couple of times, I recognized the pattern and opened up to more frequent overnight positions — staying long or short 6 times overnight for an average gain of 10 points (about 1/2%.)
As regular readers know, I almost always include the proviso to hold long or short overnight only when you’re able to hedge or watch your position, or are an experienced swing trader. In my opinion, swing trading has become nearly impossible, with over half the sessions featuring a gap up or down. In September, it happened 17 times in 22 sessions.
In the end, our forecasting went well. The dip to 2138 I forecast on Aug 19 was supposed to happen on Sep 12, but occurred a day early. And, the rally I forecast based on the expectation that the BoJ and the FOMC would hold rates steady went off without a hitch. From the day before:
The BoJ and FOMC [should] both stand pat, with the BoJ possibly increasing equity purchases (but shifting to TOPIX from NKD) and the FOMC pounding the table on a December rate hike to help prop up the USD.
If all you had done was play the Sep 9 breakdown and the BoJ/FOMC decisions, you’d still have made 8-9% in an unleveraged trading account [more for those who use margin, options or futures.] It’s a good reminder that you needn’t follow every trade advice in order to do alright. Some of you would be perfectly happy placing a few trades per month rather than per day. If this describes you, I encourage you to study the Big Picture posts and the 60-min and daily charts [our last was What to Expect on Sep 20.] I posted a compilation of them in August, available HERE, and I have to say they’ve performed extremely well.
The fact is I prefer swing trading. But, given the gap and VIX issues pointed out above, it continues to be incredibly difficult. The number of formerly successful hedge funds which have closed up shop these past few months is truly staggering.
Regardless of your orientation, I’ll continue to pare down the number of trade advices issued each day. Lately we’re running about half of what I put out a few months months ago, and I’ll continue trying to reduce the total. Most of you seem to be happy with the change.
The next few months are certain to be interesting. Deutsche Bank, with its $47 trillion in derivatives, is on the ropes. Oil, misunderstood by nearly everybody, continues to enjoy spurious 10%+ rallies. Currencies bend to the will of central planners rather than market forces. There’s an important election in the US in about five weeks. And, there are more central banker decisions to come.
However it unfolds, I’ll do my best to make sure that you see it coming.
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We’re trying something a little different with memberships this month. I’ve never been a big fan of trial memberships. Too many folks sign up in order to get the info they need that day, then turn around and cancel a few days later. But, I recognize the value of knowing what you’re getting into.
The next 25 new members will get the first month of a Renewing Monthly Subscription for an effective $100 (normally $250.) If it’s not for you, simply cancel. If you like what you see, you can continue at the regular monthly rate or upgrade to a Charter Annual membership at the currently discounted price of $850 within the first 30 days.
We’re phasing out Charter Annual memberships, in which the subscription price is guaranteed never to increase, on Oct 3 (existing Charter Members can continue to renew at their old prices.) So, this is a great way to get an inexpensive peek and still enjoy big savings longer-term.
For details and to sign up now, CLICK HERE.