Trader Talk

September's Strange Contradictions


September: a month of contradictions.

1) Traditionally the worst month of the year, the S&P 500 ends September up 8.9 percent, close to its best showing in over 70 years.

2) inflation vs. deflation. We started the month worrying about deflation, but commodities and commodity stocks soared this month...not just precious metals but base metals and grains as well.

3) double dip vs. no double dip. We started the month worrying very much about a double dip, but as the month wore on and the economic news became "less bad" the double dip worries went away...lending a boost to stocks in the second half of the month.

4) QE2 vs. no QE2. The month also started with a belief that the Fed would likely engage in quantitative easing later in the year, but —

Major indices this month:

Dow Industrials up 7.7%

S&P 500 up 8.8%

Nasdaq up 12.0%

Major indices this quarter:

Dow Industrials up 10.4%

S&P 500 up 10.7%

Nasdaq up 12.3%

The Permabears: a contrarian indicator? Before you start selling everything...take a look at this Business Insider report, which concludes that media coverage of four permabears (Nouriel Roubini, Marc Faber, Peter Schiff, Nassim Taleb) is an excellent Contrarian Indicator. In fact, they have actually constructed a Permabear Sentiment Index, and conclude by saying: "If we short the SPY when the Permabear Sentiment Index is 25% more than its 4-week average, we will make a whopping 3.5% over the following three week period."


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