Remember September?

Do you remember September? 2023..2022..2021..2020?

They were all down months, in fact the worst month of each year.

Why? There are a bunch of theories, most of which are probably arbitrary and nonsensical, but the fact is that September remains the worst month for markets on average since inception, and not just any specific sector but rather the entire broader market.

So when I see stocks rallying into the end of August...It gives some warning bells.

I've been on a bit of a roll recently with the crystal ball. (Almost) perfectly reduced exposure at the highs prior to the carry trade fiasco - could have done it a bit more efficiently and just closed the whole TNA position - the top here was marked when the broader market reached 70% of stocks above their 50D average, a simple yet highly efficient breadth indicator. The Russell reached almost 90% at it's high.

By reducing exposure at these levels, I had the cash to capitalise when NDFI dropped to 29% within just 2 weeks, mostly an exacerbated sharp move to the downside following Japan's rate hikes, screwing over the proponents of the carry trade.

At the lows of this mini-crash, the % of stocks above their 50D avg in SOXX was 0%, so I loaded up on SOXL, which quickly rebounded and I sold for a nice, rather fast 26% return, and I still hold some shares as a bet on NVDA in the coming weeks earnings (wish me luck). That same % now sits at 43%.

However the overall market is rather high, S5FI, the measure of stocks above the 50D avg in SPX, is sat at a very high 79%, it was the index that least reacted to the collapse after the carry trade uprooted itself. 

NDFI similarly at 63%, MMFI for the broader market at 67%, R2FI also 67%.

Now, remember September is historically weak, and markets are effectively at very high levels..

Given that information, does it make sense to buy here? 

No.

Therefore, I have a reasonable cash balance of 5%, will be depositing another 3% at the end of month, and if NVDA does fly, I will sell SOXL into the strength, increasing cash balance further. I will likely sit most of September with almost 10% cash balance.

This may well age badly. It could be a rare month where September does produce strength, but trading (and investing) is based on probability at the most basic level.

So I take this month as accumulation --- again.

Will begin taking some leveraged accumulation of TNA shares with a very wide stop loss.

GLTA