Despite the drumbeat of calls for a correction and the lingering bad memories of Lehman Brothers' demise one year ago, September is bucking its reputation as the worst month for the stock market. The average return for September since WWII is about negative one percent, by far the worst of any month in history.
So with the S&P 500 up about two percent so far (following a three percent August rise), what's behind this September's surprise gains?
Fast Money Trader Pete Najarian and Raymond James Strategist Jeffrey Saut chalk this up to money managers returning from their relaxing vacation and realizing they better chase this performance. After such a brutal year last year, they can't explain away another such year to clients.
"They probably are getting phone calls right now asking, 'How are we doing?'" said OptionMonster.com's Najarian.
"The Pro's are staring at their October fiscal year end where performance pressure, bonus pressure and ultimately job pressure should push them into more more stocks", wrote Saut, back in his post-Labor day commentary to clients. In his latest note, Saut noted that this phenomenon still augurs for more positive sentiment this week.
Chasing performance isn't the kind of basis for a new long-term bull market however, so how will you know when this game of musical chairs will all end? Watch the critical leaders in key sectors, said Najarian. Goldman Sachs and JPMorgan in the financials and Freeport-McMoRan in raw materials are names to follow in order to know when to get out of this market, he said. Implied volatility in these names are very low so it means investors (likely these 'performance chasers') have gained a lot of confidence in buying the stocks. Until these names start to breakdown, September may continue to buck its reputation as a bad month for equities, he said.
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Trader disclosure: On Sept. 14, 2009, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Adami Owns (AGU), (C), (GS), (INTC), (MSFT), (NUE), (BTU); Finerman Owns (PDE), (RIG); Finerman's Firm Owns (BAC) Preferred Shares, Finerman Owns (BAC) Preferred Shares And Owns (BAC); Finerman's Firm Owns (WFC) Preferred Shares And Is Short (WFC); Finerman Owns (WFC) Preferred Shares; Finerman's Firm Owns (WMT), (RIG), (MSFT), (NOK), (PBR), (PDE), (SYK), (FLIR); Finerman's Firm Is Short (IJR), (MDY), (SPY), (IWM), (USO); Najarian Owns (AAPL) & Short (AAPL) Calls; Najarian Owns (BAC) & Short (BAC) Calls; Najarian Owns (BUCY) & Short (BUCY) Calls; Najarian Owns (C) Calls; Najarian Owns (FCX), Owns (FCX) Put, Is Short (FCX) Calls; Najarian Owns (JPM) & Is Short (JPM) Calls; Najarian Owns (JOYG) & Short (JOYG) Calls; Najarian Owns (MS) And Is Short (MS) Call; Najarian Owns (MSFT) And Is Short (MSFT) Call; Najarian Owns (PALM) Calls; Najarian Owns (RIMM) Call Spread; Najarian Owns (TEVA); Najarian Owns (V) & Short (V) Calls; Najarian Owns (WFC) Put Spread; Najarian Owns (YHOO) Calls ; Najarian Owns (DNDN) Calls; Najarian Owns (HOLX) Calls; Terranova Owns December Gold Futures; Terranova Is Short (CCL); Terranova Works For (VRTS)
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