September 2023 Recap

The stock market in September 2023 offered traders and investors a roller-coaster ride, marked by both ups and downs. However, the key to understanding September's market performance lies in the foundation set during the preceding month, August.

August 2023 played a pivotal role in shaping the subsequent month. The market dynamics during August were dominated by the setup of liquidity flows, creating a landscape that traders and investors closely monitored. The implications of the Federal Reserve's monetary policy and economic indicators influenced liquidity expectations.

The Federal Reserve's cautious approach to tapering and its emphasis on data-driven decisions kept investors on their toes. The uncertainty surrounding interest rates and the scale of asset purchases had traders eagerly anticipating signals of future Fed actions.

Price created a nice Liquidity target with equal highs and a long wick from the second week of August which was immediately tapped when September opened and rejected. This signaled the lows from the third week of August were likely the next target. Since the second low did not take out the first, this was a sign that price was going to target these areas later.

As September unfolded, the liquidity setup crafted in August began to manifest in market behavior. The S&P 500 and Nasdaq, two of the most closely watched stock indices, exemplified the impact of this liquidity wave.

The S&P 500, a barometer of the broader U.S. stock market, experienced periods of volatility, primarily driven by macroeconomic data and global events. The liquidity provided easy targets, helping the index to navigate challenges such as inflation concerns and geopolitical tensions with peak areas of interest.

On the other hand, the Nasdaq Composite Index, heavily focused on technology and growth stocks, enjoyed moments of upward momentum during September but moreso to run out liquidity or fill in any imbalances.

As shown below, the range August created left behind a significant resistance area which the bodies of the candles failed to violate which confirmed our long term Bearish Bias. The liquidity infusion from August by the tech companies, many of which continued to innovate and deliver strong earnings in September gave price a path to seek expensive/overbought areas before running out the lows from mid August.

As we wrapped up September, it's evident that the groundwork laid in August, with its focus on liquidity and Federal Reserve actions, influenced market dynamics throughout the month. Understanding how these factors interplay is essential for traders and investors seeking to navigate the complexities of today's financial markets.

In a world where market sentiment can shift at the drop of a hat, having insights into the liquidity currents and their downstream effects is invaluable. To stay ahead of the curve, it's crucial to stay informed, adapt strategies, and continue to monitor evolving economic and monetary policy developments as volatility injections to move price.

The relationship between August's liquidity setups and September's market performance serves as a reminder that, in trading and investing, preparation and timing are key. Whether you're trading the S&P 500, the Nasdaq, or individual stocks, staying attuned to these nuances can make all the difference in your approach to the market.