Unhappy New Year?

 Happy Rosh Hashanah!

I assume not many people know what Rosh Hashanah is if you are not Jewish. It is the Jewish New Year. Oddly enough, the stock market tends to not perform well during the Jewish New Year period that lasts 10 days starting from today. We got a severe plunge of the market today. Is it just a coincident or it suggests something? No one knows for sure of course but next week there is a big market moving event, the FOMC. Will that trigger a big run for the market? Again, no one knows for now but there is no hurt to be prepared for such a potential!

Here is the technical side of the current market status. SPX is reaching its apex of the triangle. This is often the point when a big move starts, either to the upside or the downside. So far the momentum indicators are stuck in the neutral area and as such there is no way to be sure which way the market will go. So we can only guess for the direction. Considering the seasonality, the less great omen from the Rosh Hashanah, and the unprecedented strike of the United Auto Workers Union that has just started, I don't feel so rosy about the direction. Maybe the next week's FOMC could be the catalyst for the big move.

Hold you breath and watch what is coming....

 Here is some more detailed info about the correlation of the Jewish New Year and the stock market that my friend sent me.

Next week could be rough for the stock market…

Why? There’s an old adage on Wall Street that goes, “Sell on Rosh Hashanah and buy on Yom Kippur.”

The saying highlights the seasonal weakness that typically occurs between those two Jewish holidays. It’s similar to the “sell in May and go away” maxim we hear every year.

Today marks the start of Rosh Hashanah, the Jewish New Year. It also kicks off a 10-day period known as the Days of Awe. This is a period of intense reflection for people of Jewish faith, which ends on Yom Kippur (the Day of Atonement).

The adage originated many decades ago when it was common practice for Jewish investors to sell their stocks on Rosh Hashanah so they could concentrate on their prayers without the distraction of worrying about the stock market. They would then buy back their positions after Yom Kippur when they could concentrate on the stock market again.

Nowadays, any weakness in the stock market during this time is likely more a matter of coincidence than it is the result of millions of Jewish investors dumping their portfolio holdings.

But stocks still tend to decline during this period. Last year, the S&P 500 dropped 140 points – about 4% – during this period.

Going all the way back to 1915, the Dow Jones Industrial Average has declined an average of 0.62% between Rosh Hashanah and Yom Kippur. That’s a statistically significant weakness for a 10-day period.

The declines have been much worse during periods of economic uncertainty when the market was already struggling. For example, in 2008, the S&P 500 dropped 18% during the Days of Awe.

Of course, the market doesn’t seem to be struggling today. The S&P 500 is up 16% so far this year. It closed yesterday within spitting distance of its high for 2023.

But we are coming into Rosh Hashanah in a mildly overbought condition. And, as we showed you in yesterday’s Market Minute, we do have the setup for a large move.