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Thank Goodness September’s Over — What’s Next for October?

Ideas for both traders and buy-and-holders for the coming month

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Thank goodness September is over. And thank goodness the quarter is over. But the real question investors are asking is, “Will things get any better from here?”

First, let’s look at the bloodbath that was September:

  • Oil dropped over 10% in September from around $88 to $79 a barrel.
  • Gold fell 10% from around $1,820 to $1,620 per ounce.
  • Blue-chip stocks lost about 6% on the month. The S&P 500 was around 6.7% in the red, the Nasdaq was down 6.2% and the Dow Jones Industrial Average shed 5.6%.

The last three months are even bleaker, save for gold:

  • Oil fell from around $96 to tally a 16% slide.
  • Gold was up from about $1,480 to start July to tally a 9% gain.
  • Blue chips lost around 13% on the quarter, with the Dow off 12.1% since June, the Nasdaq down 13% and the S&P down 14.3%.

Not a pleasant scenario. Adding insult to injury was that the market didn’t just give up its gains in one gut-wrenching slide — nor did we suffer a slow bleed across several weeks. We got a roller-coaster ride in every sense. The chart showed a steep drop right at the beginning, and the momentum of that decline kept the market riding up and down hills for the last month-and-a-half.

What’s Up in October?

InvestorPlace’s chief technical analyst, Sam Collins, warned Friday morning that market support was nonexistent and that the major trend was down, down, down. Trading has seemed to prove this out.

If you are a super-aggressive type and want to bank that we will see more mayhem, consider the iPath S&P 500 VIX Short-Term Futures ETN (NYSE:VXX). Traders not familiar with this sophisticated investment can read about it at length here, but essentially you are betting on a rise in volatility and the VIX volatility index (or so-called “fear index”) as much as a selloff in the market. And I think we’ll all agree that volatility is pretty crazy right now.

But take care — this is a short-term investment tied to market volatility, so naturally it can jump all over the map. It is not for the faint of heart. Also, take care to bet against the market as we enter earnings season in earnest — a spate of good reports could turn around sentiment in a hurry.

For the long-term buy-and-hold crowd, don’t think that you’re out of luck. While the short term is bleak and volatile, we should not really be surprised to see a contraction. The market had “priced in” economic uncertainty from high unemployment, Greek debt problems and lackluster U.S. growth. The fact that the Dow opened Monday at around 10,800 and went to nearly 11,400 Tuesday should have been a sign that the trouble had been “priced out.”

Article printed from InvestorPlace Media,

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