After one of the best starts in 40 years on the normally ‘scary’ month of September, I showed earlier this week why the rally could continue for the rest of the month.
Well, maybe it isn’t quite that simple. Turns out, next week is one of the most bearish weeks historically. We looked at how September does the week after option expiration – so next week. We’ve noticed over time, the SPX tends to sell-off some after option expiration, but September seems to really drop.
Going back to 2000, the SPX is down -1.12% on average and up just 23% of the time. Compare that with about flat and up 54% for the average week. The median return is actually worse, down -1.63%.
Here are the individual returns since 2000. What really stands out is the past five years it is down four times and some of the drops are huge.
What about the Monday after September expiration you ask? Again, looks weak, as it is down -0.43% on average and up just 23% of the time. This is much weaker than the average Monday.
So there you go. I’m still bullish longer-term, but after the run we’ve had, a little break could be warranted. History suggests being very careful next week.