Surviving a September plunge

SEPTEMBER is the meanest month in the market, usually ending lower than when the month starts. October often includes the final section of the September plunge, but the market usually finishes higher at the end of the month.

This makes for a very high probability of a market retreat in September. Experienced traders like Kathy Lien in the US suggest that Wall Street’s record-breaking run just hit a wall. She cites rising jobless claims and hot producer inflation. All of this adds up to a margin squeeze, which would magnify the impact of any market retreat.

This highlights the key question for traders and investors. How does one distinguish between a stumble followed by a recovery, and a more serious market fall or collapse?