“The greatest danger for most of us is not that our aim is too high and we miss it, but that it is too low and we reach it.” -Michelangelo
There’s an old saying on Wall Street to never short a dull market. “Shorting the market” means you sell first (borrowing the shares), then hope to buy back later at a lower price and pocket the difference. In plain English, a short is a bet that prices will fall. The saying suggests a quiet market is more likely consolidating for potential further gains than reaching stall speed. Well, the S&P 500 has been unusually quiet over the past few weeks, while holding above support from the early June peak and above its now upward-sloping 10- and 20-week moving averages.
For four weeks in a row, the S&P 500 hasn’t gained or lost 1% for the week, the longest such streak in seven months. We’ve heard all month how bad September has been historically, yet not a single day this month has seen the S&P 500 drop more than 1%, just like last September. In fact, the index hasn’t seen a 1% drop in 37 trading days.
By the way, do you like the image of a bull watching grass grow? To me, that is about as dull as it gets. The good news — better times and more excitement for the bulls could be near.
This Could Be the Start to a Rally
We’ve been on record that some weakness and choppy action in the first part of September would be perfectly normal and even healthy. Well, now that the Fed meeting is out of the way, we continue to think the path of least resistance is higher. We discussed the Fed meeting last week, but the bottom line is we read the meeting as much more dovish than others did. With the S&P 500 jumping nearly 3% in the three days since the first hike in more than three years, the market seems to be reflecting that view as well.
Stay on Top of Market Trends
The Carson Investment Research newsletter offers up-to-date market news, analysis and insights. Subscribe today!
"*" indicates required fields
We will discuss this more soon, but be aware that October has been the best month in midterm years historically and November the second best. We wouldn’t be surprised to see some early buying ahead of this starting now.
A Lot of Bears
Yes, September is a historically weak month, but as we noted at the start of this month, we thought the stage was set for a surprise rally. One of the big reasons is sentiment has become decidedly negative.
Well-known bulls are cutting their targets, and various sentiment polls are flashing extreme skepticism. The main worries? The Fed is going to keep hiking and hiking and AI spending might start slowing down. One sign of the anxiety — with the S&P 500 only two percent from new highs, the CNN Fear & Greed Index is near extreme fear, something we like to see from a contrarian point of view.
The AAII Sentiment Poll saw a huge jump in bears last week as well, up 14% in one week to the most bears since May 2025, while the bulls fell to their lowest level this year.
We’ve also seen a huge drop in active manager sentiment over the past few weeks. Add it all up, and Septemberphobia looks real. We continue to expect the crowd to be wrong with their bearish calls, making space for a possible nice end-of-month rally.
Thanks as always for reading what our team has to say. For more on our latest thoughts on it all, be sure to watch our latest Facts vs Feelings podcast below. Thank you!
For more content by Ryan Detrick, Chief Market Strategist, click here.
9139346.1. – 22SETP26A
