Coming into September the consensus was we were due for a big drop. I’m serious nearly no one was bullish. Funny thing about that, September is off to one of its best starts in 40 years.
Hopefully you listened to us here at Schaeffer’s, as we were all over the media noting why we could see a surprise rally. Joe Bell, Todd Salamone, and myself all were on various networks looking for a surprise September rally. The big question now is can we expect this to continue?
I discussed this with the Wall Street Journal earlier today and in short, it looks like this rally could still frustrate the bears. After 11 trading days in September, the SPX has been up 10 of them. Going back 40 years, this is the first time September has ever seen this.
Again, when you consider all the ’87 crash calls, September worries, and Syria concerns we saw at the end of August and early September, it is amazing how wrong so many were. When there is that much worry, that makes expectations much lower. In other words, the bar is set very low and if the worst doesn’t happen, big rallies can take place. Exactly what we’ve seen so far in September.
Next, we looked at all months and found there have been just five other months that started off this strong, up 10 of the first 11 days. What is incredible here is the rest of the month was higher five out of five times after such strong starts. In fact, it is up more than 2% on average!
So there you go. As most studies usually conclude, strength begets strength. This study does little to dispel that.