It is the last day of August, and today we need to review the seasonality of the markets going into September so we can be ready for it all. This is the first year that I have started to let data influence much more of my decision making, for better or worse.
No alerts went off today, but we are in the middle of several positions.
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$TGT -5.45% (Calls)
$TTWO -4% (Calls)
$EBON -6.44% (puts)
$SCHD +0.37% (commons)
$SOXL +20% (Commons) - Cut this one at 20% as I'll use the capital for other positions. However, I am still bullish long term.
$AMZN +30% (Calls) - Cut at 30% profit as this was a high dollar position, so I am happy with the profit. Will consider reentering at a later date.
The open positions are mostly down for now although we have a lot more time and I will be watching them closely this week.
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EBON is flirting with the 50MA again today and if you aren't already in the position, there is still a good chance. I'd go small and give yourself a month or two out in strike for the $2.50p.
AI is another short term put that I am interested in. It is more or less in the same classification as EBON as far as I am concerned. It looks as if we might get a confirmation candle tomorrow. Keep posted and go small.
HD, Home Depot, is one that I have been considering for some time now, but waiting for it to pull back to get better entry and thus justifying a bigger position. HD typically does well into the winter months, especially October and November, over the last 10 years according to Trend Spider's seasonality. While we are waiting for it to consolidate back to the 180MA, I think we can snag a short term call off of a VWAP support.
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What to expect in September?
The honest answer to this question is, it is anyone's guess. Let's be honest, there has been very little that is considered normal about this year and last. From inflation and tapering to Covid and Afghanistan, what could we possibly expect.
VTI, or the total stock market ETF, clearly shows that in the past 10 years, September was the worst month.
September for SPY, S&P 500, is tied for the worst month over the past 10 years.
Same with DIA, or the Dow Jones.
QQQ, or Nasdaq, is tied for the worst month with December. The percentage numbers you are looking at represents what percent chance the stock/ETF has of finishing out that month positive, or with gains. So, over the past 10 years, VTI has a 44% chance of finishing September up, or a 56% chance of falling.
Obviously past performance doesn't indicate future results, but we are in the age of data and analytics, and I find it very interesting to consider this and use it as a lead when we are investing and trading.
Do you remember last September? The Nasdaq fell almost 14% in a three week time span. (Just imagine what this did to my TQQQ).
There is nothing we can do but prepare for every outcome. This is why I have been taking profits, going smaller than normal, buying up safer positions (SCHD) and other things getting ready for the September dip. Am I selling everything? No. Am I prepared if we do dip? Yes. Keep some cash on hand, ready to buy the dip.
Why do the markets pull back in September/Fall? It is because investors are taking profits from hot summer tech stocks or growth plays that they had and are getting ready for a winter run. The stock market is seasonally cyclical. Money flows out of one sector and into another. That is a sign of a healthy market. As you can imagine some companies do better in the holiday season, leading up to Christmas. AMZN, TGT, WMT, DG? And others don't.
This is why I don't sell everything and run for the hills. Sometimes as investors we need to remember to take profits, and rebalance our portfolios. So from now on, let's do the rebalancing in August.
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