Should You Write Off September?

 |  Includes: DIA, QQQ, SPY
by: Babak

If you want to totally ignore September, I don’t blame you. Historically, that has been the smart thing to do:

september worst month dow jones monthly
Source: Alan Newman’s Cross Currents

The famous Wall St. adage: “Sell in May and go away!” suggests that you buy at the start of November and sell at the end of May. There is nothing magical about November, nor May.

But following the advice means that you avoid both the summer doldrums and the dangerous months of September and October (where many crashes have concentrated) and concentrate on the performance packed time of year straddling the arrival of the new year.

September is such a bad month that there is only one decade (1911-1921) in which its average performance was in the top half of the months!

It is still a mystery why September has delivered such poor performance. Equally mystifying is why the months from November to April provide the best performance.

Market Timing
The timing of the market is important mostly to investors and swing-traders. But even if you are a short term trader, it is useful to know the underlying current of the market at different times of the year.

If you’re interested in market cycles, here is more information on the four year cycle and the ten year cycle (with graphs).