September is the Worst Month for Stocks and It's This Week (August 27-September 1)
August 27-September 1, 2023 by Adit Dayal for RIPPYGLOBAL.
Happy Sunday everyone and welcome back to the Rippy Global weekly outlook. The market rose around 1% last week posting slight gains after Fed Chair Jerome Powell’s speech at Jackson Hole where he reiterated how the Fed’s policy will be data driven (which we have a lot of coming this week).
Let’s take a look at what this week has in store!
This week, the Fed’s preferred inflation index, the PCE is releasing after Powell stated that their take on how to control inflation and bring it back to the 2% target will be data driven. This week was a frenzy of new information to the market, where NVDA posted a huge beat with amazing guidance and price target upgrades from all the huge investment banks. That being said, even with the good news the market is flip flopping and hasn’t posted consecutive gains in over 19 trading days of August. Speaking of seasonality, September actually happens to be the worst month for stocks in the S&P 500!
There’s going to be much less earnings reoprts and guidance which means investors are going to be looking at macro data much stronger this week which is why I would keep a keen eye out for those releases this week much more than these last few weeks. Powell pointed out how the Fed watched the core PCE and that is the number we are getting this week, with an expectation of 4.2% and any number hotter will likely tank the markets again.
After a dry IPO season, Instacart has just applied for an IPO via the Nasdaq under the ticker $CART. This is just after Arm (a chipmaking company owned by SoftBank) filed for an IPO. Rising IPO’s are a sign of a bottoming market and hopefully the market sees this as good news.
Automobile stocks have been the talk of the year and going into the last part of the year there are some good catalysts for this sector and there should be a lot of volume flowing into the good names and eradicating some of the bad names from the market as investors shift their focus to the rising market. Supply chain issues in conjunction with chip shortages throttled the EV market last year, and while those issues were solved, higher interest rates haven’t helped boost these companies to profitability this year. Bank of America predicts a 16% YoY increase in sales according to Seeking Alpha but here’s my thesis. I predict that once interest rates Strat coming down it will boost profitability for these companies and since the market is always thinking ahead I think we will bottom sometime in November before rates go up again. After watching the Republican debates I also believe that as we get closer to the election, if the polling shows Democratic outperformance, all the green energy names will be stronger. Stocks like LCID RIVN and TSLA all are starting to finally make some deliveries and have a high short interest so they can be interesting plays.
For my meme traders, AMC has finally finished their multi-month dilution process of converting $APE shares into $AMC shares (roughly ~1B APE shares were converted to the equivalent of ~AMC shares) and AMC underwent a 1:10 reverse stock split on Tuesday. The company continues to try and raise money and I do think after an amazing movie season this can play out well for them in the long run if they use the capital correctly, but the question really is if studios will start holding larger theatrical runs and move away from the streaming business after the success of films like Barbie, Oppenheimer, and Mission Impossible all in one summer.
This last segment isn’t really all that important, but I thought it was interesting that companies like Starbucks are offering pumpkin spice as a flavor much earlier this year in order to boost the popularity of the trend. The pumpkin spice industry is a $510M industry as of 2019 and it’s only getting bigger. Student loan payments resume this year and that should be a massive blow for Starbucks (whos chart is right on the edge) but maybe pumpkin spice can save them this year?
#1) Earnings week slows in comparison to previous weeks again but there’s still some big names like NIO CHWY and more reporting.
#2) On Monday, the Biden administration is expected to reveal the ten drugs that will be part of the Medicare price negotiations and WKHS is hosting an annual meeting.
#3) On Tuesday, Google is hosting their Google Next day conference.
#4) On Thursday, the PCE inflation report will be released and Lululemon will host their conference call with their earnings, watch for spending trends and then look at $NKE for a sympathy move.
#5) On Friday, US jobs numbers will be reported along with Chinese EV delivery numbers.
The S&P 500 ($SPX index) is rapidly unwinding and it’s possible a head and shoulders pattern is playing out unless we reclaim some of the key levels above.
My key breaks are $4430 for bulls and $4319 for bears.
The best ways to play the S&P 500 are via. SPY/SPX options or SPXL (3X Bull S&P 500 ETF.
INDIVIDUAL STOCKS & LEVELS
Let’s recap some of the levels of some popular names:
Tesla held its key level from last week’s newsletter and may be in a reversal pattern unless we break below $220 again. Long term chart it’s still bullish but needs to break above from this consolidation this week.
Apple is chopping around after earnings and has a huge gap above. They are releasing their new products this September and I’m expecting this name to chop for a while.
ARRY is a solar name that has been just chopping around for a long while here and as they say the bigger the base the bigger the break, so I’m hoping this call flow helps this name break out in the fall to $30.
In terms of insider trades, Bill Ackman’s Pershing Square Capital just bought $HHH which is a Real Estate fund and the CEO of ASAN continues to buy more and more of his stock over the weeks.
Thanks for reading this weekend’s article, have a great week!
-Adit Dayal (https://twitter.com/tradelikehulk)