Equity Clock

Stock Market Outlook for September 1, 2020

Never before has the Volatility Index gained over 15% during a session where the S&P 500 Index has shed less than a quarter of one percent.

 

 

 

*** Stocks highlighted are for information purposes only and should not be considered as advice to purchase or to sell mentioned securities.   As always, the use of technical and fundamental analysis is encouraged in order to fine tune entry and exit points to average seasonal trends.

Stocks Entering Period of Seasonal Strength Today:

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JetBlue Airways Corp. (NASD:JBLU) Seasonal Chart

8×8, Inc. (NYSE:EGHT) Seasonal Chart

S&T Bancorp, Inc. (NASD:STBA) Seasonal Chart

China Distance Education Holdings Ltd. (NYSE:DL) Seasonal Chart

China Southern Airlines Co. Ltd. (NYSE:ZNH) Seasonal Chart

Cronos Group, Inc. (TSE:CRON.TO) Seasonal Chart

Direxion Daily Russia Bull 3x Shares (NYSE:RUSL) Seasonal Chart

 

 

The Markets

Stocks closed marginally lower on Monday as portfolio managers conducted their final trades ahead of the end of the month.  The S&P 500 Index lost around two-tenths of a percent, continuing to hold in record-high territory.  The winners from the past month continued to be winners with technology capturing the bulk of the inflows as portfolio managers window dress portfolios before they release their holdings for the month in the coming days.  The laggards, meanwhile, continued to be laggards with energy, financials, industrials, and materials closing lower by over one percent.

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And as investors raced to close out the final session of the month, the volatility index (VIX) surged.  The so-called fear gauge was higher by over 15% on the day, despite the relatively muted change for stocks.  Since 1990, never before has the S&P 500 Index declined by less than a quarter of one percent and the VIX has ended with a gain in excess of 15%.  Historically, a jump in the VIX by 15% or more in a single session has typically coincided with an average decline of 2.4% in the S&P 500 Index.  The index closed above its 50-day moving average for the first time since the middle of July.  As stocks have charted new-all-time highs in recent sessions, the volatility index has been climbing, a tendency that, as we noted last week, is suggestive of a shift in the trend of the VIX and a shift in the trend for stocks.  Typically, the VIX is negatively correlated with stocks, moving higher when stocks fall and vice versa.  Investors are showing their scepticism/concern of these market heights and are choosing to pay up for protection.  But this cautious bias has also been the fuel for the grind higher to current levels in recent days.  The elevated levels of the VIX are helping to counteract evidence of complacency that was apparent in recent readings of the put-call ratio, which have been hovering around historically low levels on a daily basis.  Seasonally, the VIX tends to rise through August and September.

The S&P 500 Index just recorded its best August since 1986.  The large-cap benchmark recorded a gain of 7.01% for the month, which far surpasses the unchanged result that has been the norm over the past 50 years.  There have only been three other Augusts that have seen a better performance than the one just recorded.  The last was the aforementioned August of 1986, which realized a gain of 7.12%, while the prior two were realized in precisely two year increments prior in 1984 and 1982 of 10.63% and 11.60%, respectively.  A significant gain in this month known for rising levels of volatility is exceptionally rare and certainly not anything that we could compare to in more recent history.

Looking ahead, September has historically been the weakest month of the year for the equity market.  Over the past 20 years, the S&P 500 Index has lost 0.8%, on average  with 11 of the past 20 periods showing gains.  Returns have ranged from a decline of 11.0% in 2002 to a gain of 8.8% in October of 2010.  In our monthly report that we just released to subscribers, we break down the tendencies for the month ahead and show you the themes you should focus on through the final months of the year.  Subscribe now.

Just Released…

Our Monthly Outlook for September was released to subscribers over the weekend.

Highlights in this report include:

• Equity market tendencies in the month of September
• The risk to a key driver of economic activity through the final months of the year
• The rebound in the business economy
• What the performance of the economy has to say about which party will win the Presidential election
• Are stocks expensive?
• Should you be invested in stocks or bonds?
• The technical status of the S&P 500 Index and the US Dollar
• Sector reviews and ratings
• Notable stocks and ETFs entering their period of strength in September

Subscribe now and we’ll send you this 68-page report.

Sentiment on Monday, as gauged by the put-call ratio, ended bullish at 0.78.

 

 

 

 

Seasonal charts of companies reporting earnings today:

 

 

S&P 500 Index

 

 

TSE Composite

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