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It starts tomorrow.
The worst month of the year in terms of performance on the major indices.
I've been setting up for the worst month of the year for quite some time
It's presenting as a phenomenal opportunity, one that won't come around again until February...
With the market dropping, so will a lot of the companies that have become a bit too expensive to build any meaningful position in, and sure, you could go buy shares at that point but that still wouldn't be the best use of your money.
A synthetic stock position will be the best bang for your buck.
If you don't know what that means I can help - I gave quite a bit of detail last week, If you missed it you can check it out right here.
I promise it'll be worth the time because this could be the last chance you have to build your long-term A.I. portfolio for several months, and by then things could get crazy.
Oh yeah, and if you're not a fan of volatility you may want to brace yourself too. Because September is also the most volatile of the twelve months of the year.
Investors do everything they can to avoid the toxic combination of negative return and high volatility, but I'm here to tell you that you need not be afraid of the next 30 days.
I'm going to walk you through September - the good and the bad - so we can both come out of the month prepared for two of the best months of the year, October and November.
WHY?
The first step to thriving in a month like October is to simply understand why it's the worst month of the year for the market.
September is one of the lighter months of the year for volume. How light? Some years we see as much as a 32% drop in average volume on the S&P 500.
You can hear the crickets chirping on Wall Street when things slowdown that much.
Volume drops because earnings season is over and there are fewer headlines and events to drive the market.
At the same time, traders and investors are wrapping up their summers. Spending time getting things back to normal. Getting in their last travels for the summer.
Put simply, it's a quiet month.
But that lack of volume is a key "trigger" for the market's volatility. Lighter volume means increased volatility as pricing becomes less efficient.
Volatility in September historically increased by around 28% in September. Volatility like that almost always spooks investors. Especially when they're expecting the market to scare them a bit.
That combination turns into a self-fulfilling situation for the market year after year.
Which is why September is consistently the worst month of the year.
If you need a visual, think about a movie theater full of people watching Texas Chainsaw Massacre.
90% of the patrons know when the scary par…
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About the Author
Chris Johnson is a highly regarded equity and options analyst who has spent much of his nearly 30-year market career designing and interpreting complex models to help investment firms transform millions of data points into impressive gains for clients.
At heart Chris is a quant - like the "rocket scientists" of investing - with a specialty in applying advanced mathematics like stochastic calculus, linear algebra, differential equations, and statistics to Wall Street's data-rich environment.
He began building his proprietary models in 1998, analyzing about 2,000 records per day. Today, that database, which Chris designed and coded from scratch, analyzes a staggering 700,000 records per day. It's the secret behind his track record.
Chris holds degrees in finance, statistics, and accounting. He worked as a licensed broker for 11 years before taking on the role of Director of Quantitative Analysis at a big-name equity and options research firm for eight years. He recently served as Director of Research of a Cleveland-based investment firm responsible for hundreds of millions in AUM. He is also the Founder/CIO of ETF Advisory Research Partners since 2007, noted for its groundbreaking work in Behavioral Valuation systems. Their research is widely read by leaders in the RIA business.
Chris is ranked in the top 99.3% of financial bloggers and top 98.6% of overall experts by TipRanks, the track record registry of financial analysts dating back to January 2009.
He is a frequent commentator on financial markets for CNBC, Fox, Bloomberg TV, and CBS Radio and has been featured in Barron's, USA Today, Newsweek, and The Wall Street Journal, and numerous books.
Today, Chris is the editor of Night Trader and Penny Hawk. He also contributes to Money Morning as the Quant Analysis Specialist.