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Navigating September Trading With Gold, Junk Bonds And Long-Term Bonds

ByMichele Schneider
Published 09/01/2021, 01:47 AM
Updated 07/09/2023, 06:31 AM

TLT-GLD Daily Chart

The market is about to enter the month of September which many investors view as a historically negative month in the trading year.

Also called the September effect some analysts attribute selling as coming from investors rebalancing their portfolios at the end of the summer.

However, is the September effect something we should be worried about?

It’s possible the September effect has turned into a self-fulfilling prophecy of investors expecting a selloff and therefore they sell and create the negative month.

Another idea is that many mutual funds have a fiscal year-end in September and therefore by rebalancing their portfolios through selling weak stocks they help create a negative impact.

Keeping that in mind as we enter September, here are three important symbols that can guide us through market strength or weakness.

The Gold ETF (NYSE:GLD), High Yield Bond ETF (NYSE:JNK), and the 20+ Year Bond ETF (NASDAQ:TLT).

Gold and Long-term bonds can be viewed as safety plays while High Yield Debt (JNK) can be used as a risk-on gauge.

JNK is a risk-on indicator because it shows investors’ appetite for risky high-yielding investments.

Currently, GLD is attempting to hold over the 200-Day moving average while TLT’s has support at the 50-DMA as seen in the above chart.

If we see more strength in TLT’s this coming month, we should be careful as it could be signaling more weakness.

However, rising GLD prices may come in the form of people looking for safety but also people looking for protection from rising inflation.

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That means gold could have a better chance of rising along with the overall market.

On the other hand, JNK is sitting near new highs confirming a risk-on market environment.

Therefore, we should keep a positive expectation for September while watching these three symbols as they could hint towards coming market weakness or extra strength.

ETF Summary

S&P 500 (SPY) 447 support level.

Russell 2000 (IWM) 225 support to hold.

Dow (DIA) 356.60 high to clear. 351 support.

NASDAQ (QQQ) Holding near highs.

KRE (Regional Banks) 67.22 recent high to clear. Needs to stay over the 50-DMA at 64.32.

SMH (Semiconductors) 264.22 support the 10-DMA.

IYT (Transportation) Needs to get back over the 50-DMA at 255.60.

IBB (Biotechnology) 173.69 to clear.

XRT (Retail) Needs to get over 97 and hold.

Junk Bonds (JNK) 110.10 high to clear.

IYR (Real Estate) 108 support area.

XLP (Consumer Staples) 71.29 support.

GLD (Gold Trust) Watching for confirmed phase change over the 200-DMA.

SLV (Silver) 21.62 new support level.

XME (S&P Metals and Mining) 43.24 support the 50-DMA.

USO (US Oil Fund) 48.53 resistance from the 50-DMA.

TLT (iShares 20+ Year Treasuries) 147.79 support the 50-DMA.

USD (Dollar) Doji day. Needs to hold the 50-DMA 92.59.

DBA (Agriculture) Breaking down from highs. Flirting with the 10-DMA at 19.15.

VBK (Small Cap Growth ETF) 292.55 support.

Latest comments

"rising inflation" Michele Schneider, isn't it a bit hypocritical to talk about inflation concerns and then turn around jumping into a mass printed paper gold fund? GLD makes the claim that it is completely supported by physical gold yet it denies your every day investors the right to exchange for any of their listed 'gold'. This alone means GLD shares are just paper by the day's end. Moreover, GLD's prospectus is loaded with weasel clauses that lets them get away without the promised gold backing. See the GLD prospectus line that states they no right to audit subcustodial gold possessions. I have never heard of any good reason for why this audit loophole exists. There was a well documented visit by CNBC's Bob Pisani to GLD's gold vault. This visit was organized by GLD's management to prove the existence of GLD's gold but the gold bar held up by Mr. Pisani had the serial number ZJ6752 which did not appear on any relevant bar lists. This "GLD" bar was actually owned by ETF Securities.
They are also not at all straightforward about GLD's insurance. Their representatives will not confirm nor deny the existence of GLD's insurance. I recommend anyone curious about this to confirm via calling GLD's publicly listed number for general inquiries at 866 320 4053 and ask about this clause from the GLD prospectus: "The Custodian maintains insurance with regard to its business on such terms and conditions as it considers appropriate which does not cover the full amount of gold held in custody." Exactly how much of the fund is insured? They will not give you a straight answer and might even throw in some bizarre excuse which I've experienced. Why hide this information from investors?
Gold miners NEM, FNV, and Barrick are among the World Gold Council members that sponsor GLD. Their research promotes investor ownership of gold. Yet a few actively promote the idea that GLD is a fake and not reliable. Gold mining companies do not have an interest in promoting a gold investment that doesn’t own physical gold. That’s pure common sense.
then they buy bonds to get fixed income
finally both stocks and gold will go down. The end of the movie
This is simple. people will be selling gold to keep ready cash to buy stocks when they go down just a bit. when they buy stocks, stocks will be okay for a few days. they sell more gold to keep cash ready to buy stocks. same repeats until gold reaches 640
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