Any Market Surprises Coming At The End Of Quarter Three?

How many times do we get end of the quarter moves in markets simply because it is the end of an accounting period? A money manager who is paid a performance bonus computed at the end of the quarter might be tempted to add to winning positions, buying as high as possible near the close, to enhance the value of his positions, and his bonus.

This tactic has been around for years. I can remember, early in my trading career when I was filling orders in the Kansas City wheat pit, being told to do this. Near the close, my boss in New York would call, instruct me to run the market up on the close, but don't buy very much. Before I could respond, he would hang up, leaving me with a frustrating task. Now, with electronic trading, it is probably easier to "paint the tape" if you have different participants all going the same way.

There are other traders that only get their bonus on trades that have been closed. Consequently, there may also be some profit taking as we end the week.

The sell-in-May seasonal and go away did not work this year. Those who sold in May, fearful of being left out of the bull more, probably paid up to get back in. No one is more bullish than a sold out bull. The S&P 500 fooled many people as it staged a summer rally to 1468. Now as the unsettled conditions in Europe get more attention, the global markets are retreating. Is it possible there will be profit taking later this week?

Of the major world economies - Europe, the US, China and Japan - only the US appears to be muddling through. Come this week, the market will start to worry about another poor nonfarm payroll report.

Yes, China's growth rate is now forecast at 7 or 8%, but can we trust the numbers, and how severe are the banking problems? Has the Zombie Bank franchise moved into China?

The Japanese economy has been slowing. The current Chinese-Japanese dispute over ownership of islands in the East China Sea, if it continues, will not be good for business in either country. Yes, there might be some oil or gas near these uninhabited islands, but the markets might get very queasy if the dispute grows. Remember, the US military is supposed to protect the Japanese interest.

In Europe Merkel says that "Europe must stay the course," as the demonstrations continue in Greece, Spain and Portugal. This stay the course advice may play well in Germany but with 10 to 25% unemployment from Greece to Portugal, best not venture to the Club Med countries and speak German.

Spanish bonds again topped 6% for ten year maturity Thursday September 27. Spanish PM Rajoy, to the dismay of the Germans, has yet to make the formal request for a bail out. Some say he wants to wait until Italy is in trouble, and together they can approach the Germans, hoping for better austerity terms.

Others believe Rajoy knows the bailout would be the end of his political career. Meanwhile, the PM was at the UN today, pleading for this esteemed body to examine the 1713 Treaty of Utrecht which gave Gibraltar to the British. It is great to have a leader with proper priorities. No doubt it is also great to be away from the Madrid riots today, enjoy some fine New York dining, without having rocks thrown at the window.

Octobers past have produced some hefty bear moves. Perhaps 2012 will not give us one, but is there any good reason to be long?