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Three Reasons This Will Be A September To Remember

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  • inthemoneystocks's Avatar
    36 posts since Aug '10
    • As you all know, the NASDAQ Composite and the S&P 500 Index have soared to new 52-week highs. The last stock market correction that took place lasted about eleven trading days into the August 7th, 2014 bottom. Last week, almost every trader and investor had their eyes on the central banker's comments from Jackson Hole, Wyoming. Apparently, the central bankers did not say anything to spook the markets ahead of the U.S. Labor Day holiday. So at this time, everything looks great for the major stock indexes to trade higher into the end of the month. Below I will list three reasons why this current stock rally will likely end soon and cause the month of September to be a month to remember.

       

      1. Geopolitical events will have a negative effect on the stock market in September. So far, the major stock indexes have climbed the wall of worry when it comes to the major geopolitical events taking place around the world, but that will likely end after the August month is over. The problems in Russia and the Ukraine are not likely going to improve anytime soon. Tensions will certainly build before any resolution or peace treaty takes place. There are also major problems in the Middle East that do not seem to be ending anytime soon. The Ebola virus is also a huge negative that could affect and hurt trade around the world in the coming months should the virus continue to spread.

       

      2. Any weakness in the USD/JPY will disrupt the current carry trade that fuels the liquidity for the major stock indexes in the United States, Europe, and Japan. You see, the weaker Japanese Yen has helped the large financial institutions to buy stock indexes like the S&P 500 Index and the Nasdaq Composite. This is a very leveraged trade and helps provide liquidity for the stock markets around the world. Everyone knows that Japan is diluting their currency at an alarming rate. This is why the stock market now rallies when the USD/JPY currency pair rises and declines when the currency pair sells off. A weak U.S. Dollar Index will now hurt the stock markets primarily due to the yen carry trade. Recently, there have been many countries talking about getting rid of the U.S. Dollar as the world's reserve currency. If nations such as Russia, China, Brazil, and others start to trade without using the U.S. Dollar it could spell problems for the stock market down the road.

       

      3. Stock market complacency is now at an all time high. Just think about this, there has not been a 10.0 percent stock market correction in over two years now. Every stock market dip has been viewed as a buying opportunity. Investors simply believe that central bankers will just continue to stimulate markets via money printing if stocks decline. Currently, the Federal Reserve is tapering their QE-3 program. They are expected to end the QE-3 program in October 2014 at their next FOMC meeting. The last time the Federal Reserve ended a quantitative easing program the major stock indexes staged a correction of more that 10.0 percent. Could this happen again? This has also been the best year for new stock offerings (IPO's) since the tech bubble in 2000. If that is not telling us that the investing world is as complacent as ever nothing will. Get ready, this September is certainly going to be an interesting month.

       

       

       

      Nick Santiago

      InTheMoneyStocks

  • Perks385's Avatar
    9 posts since Sep '14
  • bystander_tan's Avatar
    7 posts since Jul '13
  • Queen of sgForums
    驚世駭俗醜不啦嘰 moderatress
    FireIce's Avatar
    265,921 posts since Dec '99
  • bystander_tan's Avatar
    7 posts since Jul '13
    • Originally posted by FireIce:

      wake me up when september ends..............

      ya will wake u up next September. biggrin.png

  • Queen of sgForums
    驚世駭俗醜不啦嘰 moderatress
    FireIce's Avatar
    265,921 posts since Dec '99
  • charlize's Avatar
    31,782 posts since Mar '05
  • Turbulent Times's Avatar
    127 posts since Jun '11
    • I share the same views as TS, among other factors not considered.

      But to put a time to it is difficult. Atleast I am ready for whenever it happens.

    • Nothing happened in September…........................

  • Happywealthness's Avatar
    8 posts since Nov '14
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