September has a bad, though well-deserved reputation as the worst month of the year for stocks.
On a historical basis, it is the worst month of the year for the S&P 500, Dow Jones Industrial Average, Nasdaq Composite and the Russell 1000. Small-caps are sort of less bad as there are two months that are less kind to the Russell 2000 than September.
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Related: Three ETFs To Own In August.
This September has the potential to be even more volatile than recent editions of the ninth month of the year. August saw the largest monthly outflows from U.S. ETFs since early 2010. President Obama continues to mull a military strike against Syria and 10-year Treasury yields continue a a dangerous flirtation with the three percent level.
With a rocky September possibly in the offing, investors would do well to get acquainted with the following ETFs as short-term trades for this month.
ProShares UltraShort Basic Materials (NYSE:SMN) Did you know that of the nine sector SPDRs none make more frequent appearances as the worst performer in a given month than the Materials Select Sector SPDR (NYSE:XLB). XLB holds that dubious distinction in three months of the year, including September. XLB's slack historical September performances are usually an extension of a trend that started in August when the ETF is also usually the worst SPDR.
The ProShares UltraShort Basic Materials attempts to deliver twice the daily inverse returns of the Dow Jones U.S. Basic Materials Index. That is not XLB's underlying index. Rather, it is the benchmark for the iShares U.S. Basic Materials ETF (NYSE:IYM), which is to say one needs keep an eye on IYM if one is long SMN.
ProShares UltraShort Utilities (NYSE:SDP) The suggestion of the often overlooked ProShares UltraShort Utilities would seem to go against conventional wisdom that shows the utilities sector is usually decent or less bad in September. That is the case on a historical basis, but with Treasury yields rising, rate-sensitive sectors are not to be trusted in the month ahead.
SDP seeks to deliver twice the daily inverse returns of the Dow Jones U.S. Utilities Index, which is the underlying index for the iShares U.S. Utilities ETF (NYSE:IDU).
Direxion Daily Energy Bear 3X Shares (NYSE:ERY) The Stock Trader's Almanac shows investors that September is usually a good time to short oil. That could again be the case this year, particularly if some of the "Syria premium" comes out of crude futures.
The Direxion Daily Energy Bear 3X Shares is an ideal play for risk-tolerant, active traders looking to profit from declines in energy equities. ERY is the triple-leveraged, bearish answer to the popular Energy Select SPDR (NYSE:XLE). What that means is when one is long ERY, one wants to see stocks like Exxon Mobil (NYSE:XOM) and Chevron (NYSE:CVX) fall. Traders looking to participate in downside for oil futures should consider the PowerShares DB Crude Oil Double Short ETN (NYSE:DTO).
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