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BofAML Repeats Art Cashin's Concerns Of A September Seasonal Slump

Having cautioned investors this morning of the historical tendency for market reversals on September 22nd after hitting all-time highs, UBS' Art Cashin's warning has been echoed by BofAML's Macneil Curry who notes risk assets are set to correct as negative seasonals dominate the S&P500 this week. This is bullish for Treasuries, Curry adds.


As BofAML notes,

The evidence is weighing against risk assets for the week ahead.


Specifically, the week after September Triple Witching (which occurred Friday and is the term used to describe the quarterly expiry of US equity index futures, options on equity index futures and equity options) is consistently one of the poorest of the year for the S&P500.

In the 32 years since the creation of equity index futures, the S&P500 has fallen 69% of the time.


More recently, it has fallen in 10 of the past 12 years. Now, with the S&P500 at risk of completing a bearish reversal formation in daily candlesticks, the evidence is increasing.

In such an environment, Treasuries should rally.

And here is the even more ominous warning from UBS' Art Cashin that markets tend to crash on September 22 after all-time highs...  based on a 2009 note from Barrons' Randall Forsyth (who cites work by Paul Macrae Montgomery)...

Montgomery recalls living through the October "massacres" of 1978 and 1979, the crash of 1987, the mini-crash of 1989, the 1997 Asian collapse and the Long-Term Capital Markets plunges, which started to cascade downward in late September. And while gold bullion topped in January 1980, gold stocks made their highs on Sept. 22 of that year, he adds. That date also saw the peak in many oil stocks.


Looking back farther, on Sept. 22, 1929, the Dow Jones Utility Index became the final major average to make its high before the Great Crash. And in 1873, a panic forced the New York Stock Exchange to shut down, Montgomery further details.


And who can forget 2008, when markets went into free fall in the days following the collapse of Lehman Brothers? What's remembered less well now is the market chaos in the subsequent days after the House of Representatives initially rejected legislation that created the Trouble Asset Relief Program


Currencies have seen historic changes around this date as well, he adds. The British pound was taken off the gold standard and was devalued a huge 28% on September 21, 1931. Exactly 54 years later, the Group of Five produced the Plaza Accord, which brought a sharp decline in the dollar and expansion of global liquidity. Black Wednesday, when Britain was forced to withdraw from the European Exchange Rate Mechanism, came a few days early on Sept. 16, 1992.


I also recollect that Treasury note and bond yields made their historic highs in late September, 1981, with shorter maturities hitting 17% and long bonds reaching 15%. That marked the end of a 35-year bear bond market from the end of World War II.


"If that's not enough, several of the astrological types claim their charts show [this] week is fertile ground for surprises – geo-political and otherwise."

Cashin ends - "Crazy?  Maybe, but forewarned is forearmed."