2 keys to navigate the stock market in September: gold and bonds

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The market is about to enter the month of September which many investors consider to be a historically negative month of the trading year.

Also known as the September effect, some analysts attribute a sell off by investors rebalancing their portfolios at the end of the summer.

However, should we be worried about the September effect?

It is possible that the September effect has turned into a self-fulfilling prophecy of investors expecting a massive sell-off and therefore they sell and create the negative month.

Another idea is that many mutual funds have a September year-end and therefore by rebalancing their portfolios by selling weak stocks they are helping to create a negative impact.

With that in mind as we move into September, here are three important symbols that can guide us through market strength or weakness.

Gold ETF (GLD), High Yield Bond ETF (JNK) and 20+ Bond ETF (TLT).

Gold and long-term bonds can be viewed as games of safety while High Yield Debt (JNK) can be used as a risk on the gauge.

JNK is a risk indicator because it shows investor appetite for risky, high yield investments.

Currently GLD is trying to maintain the 200 day moving average while TLT has support at 50-DMA as shown in the chart above.

If we see more strength in TLTs this month, we need to be careful as it could signal more weakness.

However, the rise in GLD prices may come from people seeking security, but also from people seeking protection against rising inflation.

This means that gold might have a better chance of going up with the overall market.

On the other hand, JNK is near new highs confirming a risky market environment.

Therefore, we should keep a positive expectation for September while watching these three symbols as they could portend further market weakness or strength to come.

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Analysis and summary of trading ETFs:

S&P 500 (SPY) 447 level of assistance.

Russell 2000 (IWM) 225 support to hold.

Dow (DIA) 356.60 high to clear. 351 support.

Nasdaq (QQQ) Hold close to the peaks.

KRE (Regional banks) 67.22 recent high to cross. Must stay above 50-DMA at 64.32.

SMH (Semiconductors) 264.22 supports 10-DMA.

IYT (Transport) Must return above 50-DMA at 255.60.

IBB (Biotechnology) 173.69 to be erased.

XRT (Retail) Must go over 97 and hold.

) 147.79 support 50-DMA.

USD (Dollar) Doji Day. Must contain 50-DMA 92.59.

DBA (Agriculture) Breaking peaks. Flirt with the 10-DMA at 7:15 p.m.

VBK (Small Cap Growth ETF) 292.55 supported.

Twitter: @minutedumarché

The author may have a position in the titles mentioned at the time of publication. All opinions expressed here are solely those of the author and do not represent the views or opinions of any other person or entity.



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