Overview of fourth quarter market trading conditions and trends to watch

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A few months into the remaining trading month, it is clear that the September effect played out in a classic way. The historically inspired decline in risk asset valuations was highlighted by Forex Traders analysts earlier this month. The ensuing massive sell-off came into play between the 6e and the 20e September, the Dow Jones Industrial Average having lost 5.30% in value during this period.

The September Effect – Dow Jones Industrial Average Daily Price Chart

Dow Jones Industrial Average Daily Price Chart 270921

Source: IG

Everyone likes to make a good call to market movements. Those who eased their long positions or sold short at higher levels even had the opportunity to buy the downside and rebound until the end of last week. What is perhaps as important as generating a positive return is that the September effect has unfolded as expected. Having a certain normality and technical and historical trends guiding the market, denotes a decisive moment after more than 18 months of prices driven by Covid. This does not mean that the Covid risk has disappeared; just that other price factors become more and more important.

Now is the time to buy stocks?

This return to normal coincides with the start of the fourth quarter, with October through December historically being one of the most bullish trading periods of the calendar year. Will the feeling of “business as usual” in the market mean that prices will rise from here?

With technical analysis becoming more influential, the bullish price action in major global stock indices is worth noting.

On the daily price chart, the Heiken Ashi candle pattern for DJIA indicates further upward momentum. On Friday, the 76.4% Fib retracement at 35071 provided some resistance, and the Daily 50 SMA stands at 35048. The fact that these two indicators are so close to each other means that there are price gains. additional cannot be guaranteed; however, with the 100 SMA providing support at 34,790, there is a chance for those long to place a stop loss 140 points below the current price of 34,929. A sufficiently healthy risk / reward profile for a based strategy. in markets breaking up and posting all-time highs again. A recent DJIA record being 35,633 posted on 16e August and over 700 points above current price levels.

Dow Jones Industrial Average Daily Price Chart – Bullish Heiken Ashi Candles

Dow Jones Industrial Average Daily Price Chart - Bullish Heiken Ashi Candles 270921

Dow Jones Industrial Average Daily Price Chart – Fib Retracement

Dow Jones Industrial Average Daily Price Chart - Retracement Fib 270921

Dow Jones Industrial Average Daily Price Chart – SMA What is the end of quarter effect?

Dow Jones Industrial Average Daily Price Chart - SMA 270921

Some historic strength seen in the fourth quarter is coming into play as the end of the year approaches. The “Santa Rally” is as much about portfolio managers pushing prices up in calm markets to dress their year-end returns as it is about seasonal good humor.

Getting involved in the trend too early can also be dangerous. In terms of win-loss ratios, October is not the best month, and sales during that month have a serious record. Many will wait for another milestone on the calendar to pass before they jump in, with Halloween being used by many as a trigger to go long.

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