Worst Awaits Risk Assets in September

Worst Awaits Risk Assets in September

2022-09-01 • Updated

In 2021, the S&P 500 lost 4.76% in September. What will happen this time?

There is a possibility that this scenario may repeat itself. Investors' fears are not unfounded because September is the worst month for the index. According to the historical dynamics, S&P 500 (US500) has been declining in September by 0.65% over the past 38 years.

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September S&P500 (US500) index performance since 1985.

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Average change of the S&P 500 (US500) index during the past 36 years.

The Crypto market usually also has a rough time in September. Bitcoin lost 12.7% in September 2021, 17.4% in 2020, 17.5% in 2018, 21.4% in 2017 and 45.4% in 2015. The main cryptocurrency increased by 13.3% and 3.95% in 2016 and 2019, respectively.

However, the extrapolation of statistical data to the current situation makes little sense if it is not tied to the economic context.

Several factors confirm a possibility of a deeper correction:

  • Weak numbers might relate to the financial year ending in the United States, which starts on October 1 and finishes on September 31.
  • Traders bet on a 75-basis-points rate hike at the Federal Reserve meeting on September 21, which will boost the USD and add pressure on the risk assets.
  • Guru traders sell stocks and invest in T-bills ahead of the deeper correction.

Technical analysis

US dollar index, H4

юс доллар.png

The RSI repeats the same pattern, which has also appeared twice in 5 previous months.

The H4 RSI goes to 84 -> RSI declines, while the price stays at the same level -> Another pump when RSI reaches 70 - 75 -> divergence appears -> deeper correction happens.

The US dollar index is already breaking above a recent high, and currently, the price is aiming at the 111.50 level.

US500, weekly

US500Weekly.png

US500 keeps moving inside an inverted falling wedge. The price has formed a massive range between 3500 and 3650, and it seems like sellers are aiming for it. Moreover, the 200-week moving average, which always acts as the main support for the US500, also stands in this range. If the Fed increases the rate by 75-basis-points, the price will easily decline to this support, where we expect to see the overall market reversal.

 

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