I believe many are wondering why is the market down for days in a row or even months correcting.
Often in the media, you will hear people make reference to specific times of the week, month, or year that typically provide bullish or bearish conditions.
The answers are simple.
One of the historical realities of the stock market is that it typically has performed poorest during the month of September.
September is the month when the stock market's three leading indexes usually perform the poorest. Some have dubbed this annual drop-off as the "September Effect."
Since 1950, the month of September has seen an average decline in the Dow Jones Industrial Average(DJIA) of 0.8%, while the S&P 500 has averaged a 0.5% decline during September.
The September Effect is a market anomaly and not related to any particular market event or news. In recent years, the effect has dissipated. Over the past 25 years, for the S&P 500, the average monthly return for September is approximately -0.4%, while the median monthly return is positive.
In addition, frequent large declines have not occurred in September as often as they did before 1990. One explanation is that as investors have reacted by “pre-positioning” by selling their stocks in August.
Some have even started the sale on July to snipe a buy during the crash on august and september.
Investors will take opportunity during the market crash to buy and hold long and Traders will avoid swing trading.
The September effect is not limited to U.S. stocks but is associated with most worldwide markets. Some analysts consider that the negative effect on markets is attributable to seasonal behavioral bias as investors change their portfolios at the end of summer to cash in.
Investors that have failed to avoid this bear period in the market should take it as a lesson and take note of this dates for the coming years. ⚠️
Those that have took a big blow to their portfolios should average down and go long.
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