“Sell Rosh Hashanah, Buy Yom Kippur”
— Wall Street Adage
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Over the past two weeks we observed on several occasions how some asset were at the brink, or, in other words, at a tipping point.
Without a lot of tam-tam, those tipping points have now partially been exceeded. To the risk takers favour, they have done so without sparking panic (yet).
Let’s have take a leisure walk down chart lane, but let’s be careful where or what we step on …
Today’s Quote-of-the-Day, “Sell Rosh Hashanah, Buy Yom Kippur”, is an old Wall Street adage, and has its roots in both religion and seasonality. Decades ago, Wall Street had a large and active Jewish trading community, and observant traders would step away from their desks during the High Holy Days to pray and spend time with family. That meant lower volumes and thinner liquidity, which could leave markets more vulnerable to weakness. Add the fact that Rosh Hashanah typically falls in September—historically a rather unfriendly month for equities—and a market proverb was born. You can read more here and here.
This year, in the adage sense, so far so good, with the S&P 500 now having closed below the 50-day moving average:
Humans (a race I consider myself part of - most of the time) have a tendency to wanting to see patterns, even if they are non. My pattern filter is saying there’s more work on the downside on that chart above.
Similar on the Nasdaq, where a four percent rise would be needed to break the pattern of lower highs:
The small-cap cohort (Russell 2000) has some additional suffering, given the likely Fed Fund hike later today:
As I highlighted in our weekly tome (click here), apart from seasonality, AI-build out pause fears, deterioating breadth, higher bond yields are clearly also exerting some pressure on equities. Whilst we may see some buy the rumour, sell the fact on yields (inverse on bond prices), post the FOMC-decision tonight, the 10-year yield continues to stubbornly stick around the 5%-handle:
Odds for a rate hike this afternoon, as implied via Fed Fund futures are now at 94%, AAAAND, odds for two rate hikes at above 100%:
This “one now, a second before year-end” view is also confirmed by most central bank watchers around the globe:
And then there’s of course also the Bank of Japan (BoJ), which is also expected to hike at least 25 basis points later this week:
Only yesterday the 10-year JGB yield closed above 3% for the first time this cycle:
Staying on Japan for a moment, the country’s currency has been consolidating some of its recent gains:
But longer term the tide seems clearly to have changed (for a stronger Yen, i.e. lower USD/JPY on the chart below):
Gold is holding above its 50-day moving average, having suffered under the expectations of a FOMC rate hike today:
Will we also get a “sell the rumour, buy the fact” relief-rally here?
Stay tuned …
Using the past seven tightening cycles as a guide, GS notes that the S&P usually struggles at the start, falling an average of 2% over the first three months. The pinch typically does not last long, however, with the index gaining an average of 9% over the following 12 months. The bruising exception was 2022.
All eyes on … press conference following the 25 basis points rate hike decision! Let’s see how Warsh will sooth Uncle Donald … he may just turned into a “Home Alone” Kevin …
May the Trend be with You!
André
Everything in this document is for educational purposes only (FEPO)
Nothing in this document should be considered investment advice
Investing real money can be costly; don’t do stupid shit
Leave politics at the door—markets don’t care.
Past performance is hopefully no indication of future performance
The views expressed in this document may differ from the views published by NPB Neue Privat Bank AG