MARKET ACTION IN SEPTEMBER

In a comparative situation to September 2008 stock markets around the globe sold-off hard in September. Double digit losses on indexes throughout the month were widespread due to global panic and fear surrounding the current financial crisis, one that we are still in and one that has been discussed in great length leading up to this time frame. In 2008, the US banking system was in disarray as you had bank after bank going under capitulated by the collapse of Bear Stearns and Lehman Brothers.

August showed volatility unlike we've seen since 2008. Early in August the massive sell-off was triggered by the US credit downgrade by Standard and Poor's, but broader economic concerns fed the selling frenzy. As the month progressed, attention turned to Europe and France in particular as rumours swirled about French financial institutions being in trouble. That has reignited concerns that the European Union’s worst days are yet to come.

Now. Fast forward to 2011 and this time it is the European Union and we aren't talking about banks going under but countries. Greece is obviously in a tight spot and it looks apparent they can't pay their bills. Whether they are dropped from the EU or bailed out yet again; frankly this plays no part regarding our investment decisions.

News is noise and although we remain educated and current on all events that affects the markets it does not influence our decisions. We are agnostic on the markets, meaning that if you hold on to a bias one way or the other you open yourself up to severe risk and damage. Looking at our key indicators, being price and volume, we were seeing major institutional selling back in late July and early August. We were in cash for the first part of August and then began to short the markets in our core strategies in late August and into early September. Those proved well and our strategies were ALL POSTIVE in the month of September.

One thing to keep in mind is that, seasonally, more market bottoms are put in during the September/October period than any other. Whether this plays out this year is not known, nor is it worth losing sleep over. More important is to simply judge the market's character and health on a daily basis, keeping an open mind as to what could happen. Now, being agnostic, we decided the market action on October 4th was a turning point. The markets were selling off hard on Tuesday, October 4th and undercut the lows of August before powering higher on massive volume as institutional buying stepped in and closed the session at day highs. That is KEY!

READ THE FULL NEWSLETTER

• Market Action in September
• A Glimpse Into Early October
• Performance of Our Strategies and Looking Ahead

See the full PDF version of this month's commentary as well as the archive in our Market Info Section