‘Tis the Season — To Be Worried

September 10, 2008
By seadmin

To everything — turn, turn, turn
There is a season — turn, turn, turn
And a time for every purpose, under heaven

–The Byrds (and Ecclesiastes)

Yes, it’s that time again. ‘Tis the season, and I’m not talking about the holidays. The season I am talking about is what has historically been the most volatile season in the financial markets.

That season usually starts in September and continues through October. These two months are, historically speaking; when we’ve seen the biggest one-day declines and the most significant market lows (think Black Monday in October 1987).

So far in September, we are seeing volatility that’s nearly off the charts. A 300-point Dow winning session immediately followed by a 200-point down day. So far, September has seen a 4% loss in the S&P 500.

Looking over the chart below of the S&P 500 index, my observation is this: If we break the July lows, we could see a major collapse in prices.

I am of the opinion that this could be the scariest fall we’ve seen in many years. That’s the bad news. The good news is that any further declines could set investors up for a really nice buying opportunity — especially for those who want to actively trade a small portion of their overall portfolio.

If we are able to hold the line here in terms of falling equity prices, then I expect a bounce back towards the 1300 level. As I have been saying all year, we are in a bear market, which means the majority of your portfolio should be sheltered from risk in cash and Treasury Bonds.

For those who want to take advantage of the volatility in the equity markets, then short-term trading using exchange-traded funds (ETFs) could be just the right choice for you.

Doing so has never been easier, thanks to my ETF Trader advisory service. Our track record of late has been superb, banking very nice gains in more than 80% of our last dozen trades.

To find out more about how to trade this volatile market, click here.

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