You’re not supposed to try to time the market, but it’s kind of cool when it works.
Earlier this month Real Money’s Jim Cramer discussed the familiar idea that September is the worst month of the year for the markets.
But he took it a step further, with the help of a key technical analyst, and pegged the starting day for volatility.
“Seasonally, September 17th has been the beginning of a significant decline in the markets,” Cramer wrote earlier this month on Real Money. “We are relying on the work of Larry Williams, perhaps the greatest technician of our era, not because he can observe obscure head-and-shoulders formations or "W"s or cups and handles, but because he spots patterns that are worth worrying about or can be profited from and we are about to head into the most negative of moments.”
Sure enough, the S&P 500 obligingly fell 40 points Friday. It was hit even harder on Monday, before a relatively stable day Tuesday ahead of the Federal Reserve’s Open Markets Committee meeting.
On Wednesday, the index rebounded sharply as the FOMC avoided being specific about when it will begin tapering its asset purchases. But whether the bounce puts an end to September turmoil or is just a temporary relief rally remains an open question.
From Cramer’s take there are still plenty of concerns to worry about.
“First, I like to look at leadership,” he said. “How broad is it? Every day there's a different group of leaders, but we have to ask what has staying power. Right now, the only part of this market that has staying power is the worst part: oil and gas” Cramer wrote.
“These days when oil goes up, nothing happens except oil stocks go up and they don't have the bullish cause one bit,” Cramer said. “Oil and gas have become parts of the basket of raw costs that has made this moment untenable.”
A higher petroleum complex means higher inflation, means lower prices for stocks, which leads to a reverberation of costs throughout the economy.
“Transport costs are climbing at a record pace,” Cramer said. “Plastics are through the roof. That unholy matrimony of superstorm Uri and Hurricane Ida has meant that prices of everything from paper to plastic products to basics like boxes and disposable cups are going up in price, so that we can't believe there can be no let-up. Aluminum, a huge energy user, is at prices we haven't seen in ages. Inflation is rolling through the system seemingly everywhere.”
And on top of it all, Democrats in Washington are trying to raise taxes, especially for corporations. “These days, that doesn't help the bull cause, either,” Cramer wrote.
But cheer up. October's just around the corner.