Friday Roundup: September Seasonality, The Gold Index, Commodities Action
Seasonal cycles do not cause market moves, they simply reflect tendencies.
We have harped about the pending weak seasonal period during September. The market did well during the August period of positive seasonal heat, but the real test will be the action going forward into mid-October:
The above chart of the NASDAQ 100 index shows that a rally often occurs in August. September, however, is most often a time of weakness in which seasonally lasts into mid-October. Seasonal cycles do not cause market moves, they simply reflect tendencies. It is quite possible for markets to move contrary to seasonal cycles – when they do, it is a sign that spot factors are strong enough to outweigh seasonal factors.
The EBB (Erlanger Big Barf) indicator measures the momentum of the VIX relative to the momentum of the S&P 100 Index. The higher the EBB, the more bullish are option traders. Divergences following extremes are set-ups for contrary moves. The strength in August is unconfirmed by the EBB – a move above the blue lined channel (see chart) would be constructive. A break below the "zero" line would trigger an indication for a pullback phase.
Gold and Other Commodities
The Gold Index rallied off of its long-term trendline and has etched out a tightening pattern of consolidation that began in January. The Gold Index is trying to break above the key 150 resistance level:
Gold and base metal prices continue to consolidate. Energy prices are holding around the $70 level for crude. Livestock is at the high end of a two-year long channel, while agricultural commodities continue to grind higher.
Light Sweet Crude, having failed to break above the $80 level, is now testing the $70 level as support.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.