It has certainly been an interesting run since the early June low. Whereas June and July were incredibly volatile periods with a lot of bipolar action from week to week (4-7 sessions up, immediately followed by 4-7 sessions down), August was incredibly placid after the early month employment data. September has been more of a mixed bag as some volume has returned to the market and more volatility. But one thing running true through all these months has been the reaction to headlines, especially the central banker type. As I assess September with 2 sessions to go it is a remarkable testament to the central bank dominance. See the chart below:
As of yesterday's close the S&P 500 is up 1.9% in the month of September. It does not take a rocket scientist to see where those gains were concentrated. On Thursday 9/6 which was the ECB meeting day the S&P 500 gained 2.0%. On Thursday 9/13 which was the Fed meeting announcement the S&P 500 gained 1.9%. So that is 3.9% in those two sessions; in a month where the market is up 1.9%. So every day that was not a central bank announcement day netted together gave you -2.0%. There have been 15 "non announcement" sessions in the month of September; 10 of them have been negative.
If we cast the net a tad bit wider and include the day immediately AFTER these two announcements days – i.e. the "halo" days of the heroin injections into our veins, the data is even more damning. Friday the 7th and Friday the 14th generated gains of 0.4% each. So taken together the 2 announcement days and the 2 "halo" days right after generated gains of 4.7%. All other sessions generated losses of 2.8%. There have been 11 "non announcement" or "non halo" sessions in the month of September; all but 3 have been negative. That's amazing.
This ties into this piece that shows since 1994 almost all market performance has centered around Federal Reserve (and now I guess we can include the ECB!) announcement days and the 1 day windows before and after said announcement days. [July 16, 2012: Almost Entire Market Return Since 1994 Centered Around Federal Reserve Announcement Days]
Any securities mentioned on this page are not held by the author in his personal portfolio. Securities mentioned may or may not be held by the author in the mutual fund he manages, the Paladin Long Short Fund (PALFX). For a list of the aforementioned fund's holdings at the end of the prior quarter, visit the Paladin Funds website at http://www.paladinfunds.com/holdings/blog