An August to forget, a September to remember?

August 2011 should go down as one of the most volatile months for stocks in recent memory. For example, for the first time in its history, the Dow (chart) experienced four consecutive days of 400 point swings. The Dow Jones Industrial Average also had a trading range of over 1400 points in August. In addition, the VIX index (chart) also referred to as the fear gauge soared over 50% on the month before retracing and is still at elevated levels. This is truly astonishing volatility that is rarely seen. For the month, the Dow (chart) fell 4.4%, the S&P 500 (chart) -5.7% and the Nasdaq (chart) lost 6.4%. Since the highs in May, these indices have corrected by approximately 10%.

Welcome September! Historically, September tends to be one of the weakest months if not the weakest month for equities. But after this summer’s sell-off, I am not so sure that this month will comply with history. What may help the markets in September is that throughout the August bear raid, the major averages managed to hold critical support levels, which included a four day rally at the end of the month. That said, the economy and the jobs market are going to have to show some signs of recovery in order for the fear and unprecedented volatility in this marketplace to abate. We had a decent start this morning with the ISM manufacturing index reporting a value of 50.6, which was better than expected. However, this is just slightly above contraction. Tomorrow all eyes will be watching for the key jobs report which comes out before the market opens. Good luck to all.

Have a great day.