mornin all

If you think the FTSE and UK follow the DOW and S&P 500 then read the following:-


"The Dreaded Month
By Jason Goepfert, sentimenTrader.com

Bottom Line: September has a deserved reputation for being difficult for longs, and when the month leading up to it was positive, it has been even more difficult.

I promise not to belabor this point, since most of you either put no faith in this type of analysis or because you've already read so much about it you're sick of hearing about it. For those of you, few as you may be, who care to know, we're about to enter the weakest time of the year.

As you can see from the Seasonality section of the site, September has by far been the worst month for the S&P 500 since 1950. With a negative average return and less than 40% of the months being positive, there can be little doubt why the month has earned a reputation as being "bad". None of this is new, but I do want to touch on a couple of other things.

If we look at how the S&P has performed by day of month (also available in the Seasonality section), we see that the first three days of the month are among its most positive. In fact, there are seven total days in the month that have shown a positive average return - and three of them are the first three days of the month. So historically anyway, if we are going to see any gains for the month, they are more likely to occur near the beginning.

If we go back and look at how Septembers have performed after August closed with a gain, we see that only 9 out of the following 29 Septembers were able to also close higher than they began. Over the past 10 occurrences, only 1 managed to rally in September. Something else that happened when August closed with a gain is that the "first 3 days" pattern to start September also broke down. The edge isn't large in the first place, but it was reduced to a great degree when August was positive. The first three days in September have been positive much more often when August closed negatively than when it closed positively. One complication is Labor Day - the market tends to be quite positive the day before the holiday, and we also have the widely-watched jobs number that day.

Nearly every time I talk about these seasonal patterns, I remark that I consider them little more than a gentle wind either for you or against you. On only a few occasions each year do I consider these historical patterns strong enough to consider altering a trading plan, otherwise they are something to consider but not necessarily act on. For the coming month, the historical pattern is clearly in favor of the bears, but again to me all that means is that I might be a little quicker to take any profits from the long side and a little more hesitant to try to pick the low of any down move.

Conclusion

I've been mentioning in the last couple of comments that I thought lower prices were more likely than appreciably higher ones, and so far we've been wavering about the 1100 level on the S&P for the last 8 trading days. Many of the negatives I had been mentioning have worn off, and as of today's close nearly every one of our short-term indicators is in neutral territory. With extremely low volume (that is not program-trading related), the questionable beginning-of-month seasonality, the pre-Labor-Day positive influences and the looming jobs number, it is difficult to recommend aggression on either side of the market at this point.

Longer-term, nothing much has changed. The mutual fund cash level discussed above is disconcerting, and I would consider it a negative factor. Also negative is the fact that margin debt on the NYSE continues to decline, according to their most recently released figures. As I've outlined before, we prefer to see investors taking on additional risk by buying on margin (as long as it doesn't get out of hand). The flip side is that there is now nearly $200 Billion in cash sitting in investors' cash and margin brokerage accounts at NYSE-designated clearing firms, a new all-time record, leaving the available cash figure the most positive since April 2003 (to see a chart, use the Chart Quick Pick feature and scroll down to "Margin Data - NYSE" under the Cash Levels section). In order for this to be a positive factor, though, investors have to be willing to take on risk by buying additional stock. Despite these negatives, the positives we've outlined over the past several weeks are compelling, and I continue to believe that should we see a short-term decline which puts us into an oversold condition, it should prove to be a good buying opportunity for longer-term traders."

Good luck all

Druid.



--------------------------------------------------------------------------------