Throw market history out the window when trading this September

Jeff Macke Yahoo Finance

September is supposed to be volatile, but if we’ve learned nothing else from the last nine months it’s the limits of investing based on history. If you need a refresher on this point wait until the return of anyone who followed the dictum “Sell in May and go away.” True to new form, the market, at least so far, has seen only a barely-perceptible uptick in volume and activity in the new month. Yesterday the S&P 500 (^GSPC) closed down a mere .08% at 2000.72, though the failure to hold early strength was somewhat troubling.

What has worked this year is what always works: have a gameplan and stick with it unless, or until, the facts change at which point it’s time to alter the plan. That sounds glib but it’s not. Long time market participants know that admitting defeat is one of the harder skills to acquire in investing. In the attached clip Jeff Saut of Raymond James walks us through the reasoning behind reversing his call for a 10-12% correction he thought had started in late July.

In short, stocks fell through initial support in the mid-1900s but found an excuse to rally in the form of economic data just when sentiment was susceptible for a reversal. As has been the case for most of the last five years, when stocks needed to rally they did. Bears got burned. Doubters were left stuck on the sideline as the stock market put in its best August in 14 years.

So Saut backed off his correction call but that doesn’t necessarily mean he’s chasing stocks here. So far at least this rally has been led by cult-stock tech and other over-extended favorites. “We traded up to all-time highs (on the S&P500)," Saut points out. "The Dow has not confirmed that yet. Neither have the transports, the utilities or the Russell 2000. You may get that with the alleged Russian - Ukraine cease fire but as of now we have not had that as of yet.”

So the diehards wait for confirmation the morning after previous leaders like Apple (AAPL) and Facebook (FB) saw disturbing reversals. With big jobs data on deck and S&P 500 clinging to the mentally important 2000 level we can throw history out the window when it comes to guessing the market’s next big move.

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