September has a reputation problem.

Yes, it’s historically the worst month of the year on “average”.

But blaming the calendar for weak markets is a little like blaming Monday for your hangover.

The date usually isn’t the problem. What you brought into it is.

That’s the key distinction heading into September.

When you look at the 20 best Septembers since 1928, 16 occurred with the S&P 500 above its 200 day moving average and 15 came with the market already positive year to date.

The worst Septembers show almost the exact opposite profile.

Yes, this is all a bunch of fancy data I spent hours working on. But to put it simply...

Bull markets generally don’t care what month it is. Weak markets do.

That’s really the takeaway.

September itself isn’t the risk.

Weak trends, deteriorating breadth, and vulnerable charts are the risk.

Let’s get into it.

Before I get into the individual charts I’m watching, I always like to understand the context of the broader market.

So let’s start with the S&P 500.

If we zoom out and understand the market structure first, it gives us the context for all the trends and trades taking place underneath it. It tells us whether we should be pressing, fading, or simply being a little more patient.

The primary trend is still higher. That hasn’t changed.

Tactically, though, things have gotten a little messier.

The S&P 500 is chopping around in a range while short term breadth has been deteriorating.

Fewer stocks are participating, but we also haven’t reached the kind of washed out breadth readings where weakness starts becoming an opportunity in itself.

We’re basically stuck in market purgatory.

Not bad enough to get excited about buying weakness.

Not strong enough to start swinging at everything that moves.

And that context matters as we work through the charts below.

The mega caps aren’t dominating the market like they have in previous years, but they’re also not broken.

The MAGS ETF remains above its all time high AVWAP and continues to work through a large base.

That’s important because roughly a third of the S&P 500 lives here.

As long as these stocks are holding their underlying uptrends, it’s hard for me to get aggressively bearish on the broader market.

The more interesting question is whether they can actually start leading again.

Amazon

Amazon is exactly the kind of messy chart I’m willing to stalk in this environment.

It’s sitting near support around the prior breakout area with relatively clean risk. Consumer Discretionary broadly hasn’t been impressive, but if Amazon can find its footing, there’s room for a tactical mean reversion move back toward the upper end of the range.

I don’t need to marry it.

I just need a decent entry, a defined exit, and hopefully a nice dinner together.

Nvidia

Nvidia continues to look constructive.

It broke out and is now building another base around the prior highs. It’s not sitting right on top of support anymore, so I’m not chasing it here, but this is one of the stocks I’m watching closely.

If the S&P 500 is going to make another meaningful push higher, these mega cap names probably need to participate.

Software has been one of the more interesting reversal areas recently.

Tyler Technologies is a good example.

Price is attempting to reclaim the 200 day moving average after a long period of weakness.

This is early.

And bottoms are messy.

Nobody rings a bell and hands you a certificate saying the downtrend has officially ended.

I’m more interested in seeing whether these names can correct from overbought conditions without falling apart again.

If RSI can hold around 50 and reclaimed levels become support, the evidence for a larger trend reversal gets stronger.

Small exposure and patience make sense here.

I’ve been pretty critical of parts of the semiconductor space lately. Some of the charts have looked vulnerable, and I haven’t wanted to give that weakness a free pass.

But semiconductors are still a leadership area I want to see reassert itself.

It’s the largest industry within the S&P 500, and more importantly, it remains one of the major linchpins of the entire AI trade. If this market is going to make another sustained push higher, it would certainly help to have semis back in gear.

That’s why a chart like SanDisk gets my attention.

Strong underlying trend. Consolidation. Reclaim of the all time high AVWAP. Then follow through.

I’ve said this before, but I love clean charts. I don’t necessarily love waiting for perfectly clean trades.

Sometimes the better opportunity comes while a chart is still working through the mess because your risk is tighter and your entry is better.

If semiconductors start reasserting themselves here, there are plenty of setups worth paying attention to.

I’ll keep my crypto thesis sophisticated:

Buy strong charts with defined risk.

That’s it.

Crypto spent months doing nothing interesting, so we didn’t need to talk about it.

Now some of these charts are trending again, so they matter.

We don’t suddenly need to become experts on blockchain architecture because the chart went up.

Hut 8 is one I like here.

The weekly chart has a clean breakout and retest while RSI is holding near 50.

Zooming into the daily, the 200 day moving average is becoming support and short interest adds another wrinkle.

I’m currently long HUT.

That doesn’t mean I know what Bitcoin does next.

It means I like the chart and I know where I’m wrong.

Forget the idea that September automatically means stocks go down.

The better question is what kind of market is entering September.

Right now, the primary trend is still higher, but participation is becoming more selective.

September doesn’t mean hide under your desk.

It means stop giving bad charts participation trophies.

Check it out.

🚀 Throw it on 1.5x speed and let it rip.

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The Sunday Stalk List

Tomorrow, I’ll break down more of what I’m buying in the Sunday Stalk List.

If you want clean charts, clear setups, and tactical insights, this one’s for you.

It hits your inbox every Sunday so you know exactly what to stalk for the week ahead.

Cheers,

Larry Thompson, CMT CPA

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