Stocks: Another Scary September?

The big problem here is that the rally is based on false optimism. The economy is still falling. There are something like twice as many foreclosures as new home sales. New home sales are primarily to 1st time home buyers, lured by the $8,000 tax credit. That will end in November.

September’s reputation for danger is indeed deserved. The 1929 stock market crash began in September. During the subsequent September, in 1930, the Dow Jones industrial average fell 15%. Even worse, the index plunged 30.7% in September 1931, still the worst September in the Dow’s history. More recent Septembers have brought S&P 500 plunges of 12% in 1974 and 11% in 2002.

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