Good afternoon fellow traders. I'm sure by now you've seen how the market's waffling right around where it closed yesterday, which was roughly in line with where it closed Friday, which also happens to be where it was trading in the middle of August. Welcome to the September snooze. This time though, we're sleepwalking through September against a backdrop of mixed economic messages. Yes, I've got an update on our bigger-picture outlook for you below. After that, however, I also want to take a look at why September has such a bad rap when it comes to the stock market. Funny thing... my current pessimistic opinion may be 100% supported by the calendar. Still Slightly Bearish You know, with today's modest gains for the market, I can see how someone could be thinking a little bullishly. I'll even give credit where it's due: The NASDAQ 100 (^NDX) is back above the same 3x3 DMA that we suggested was giving us a bearish clue (by virtue of the ^NDX falling under it) just a few days ago. I'm going to stick to my guns here, however, and continue to expect noteworthy weakness more so than immediate strength. While it may be a minority opinion - not to mention an unpopular one - this is one of those cases of "we've seen it too many times before" to pretend like it's an impossibility now. As we've also been telling you though, a dip doesn't have to be the end of the world. A pullback from here would actually be a healthy thing, in the long run. Anyway, that outlook raised a good question yesterday that I think merits a public answer in the newsletter for all you guys and gals. Q. Where are you getting the potential 'bottom' levels of 2726 and 2665 for the NASDAQ 100? A. Great question. The answer is, the 2726 area is approximately where the 25x5 DMA (displaced moving average) will be by the time the ^NDX could actually test it as a support level, or floor. The 2665 level is roughly where the 38.2% Fibonacci retracement line is waiting. I know neither of those tools are something you'll hear much about on CNN or read about over at www.wsj.com. But, considering how important they are and how well they work for traders, maybe they should be considered by those mainstream venues (though I'm not going to hold my breath). That being said, there's another aspect of my pullback theory that I didn't get a chance to explore with you yesterday - a dip to the 2665 area would represent about a 5.0% pullback from the high. Frankly, that's still on the low-ish side of healthy pullback sizes, but it'll be enough to hit the bigger bull trend's "reset" button after stocks hit a wall following the 14% runup from early June. In fact, I don't think the market will be able to move meaningfully higher from here without a good-sized pullback. With that in your back pocket.... September Really Does Stink I don't know how many of you guys are familiar with Hirsch's Stock Trading Almanac. If you're not, it's a trading journal/calendar that has averages, stats, and tendencies for every month and season of the year. One of those statistics lets us know the average return for any given month of the year. Care to guess which month is the worst - on average - for the market? It's September. For the past 50 years, the S&P 500 has averaged a 0.6% loss in September. That alone may have a bunch of you thinking we may as well assume the worst for the month, and head to the sidelines until October. Here's the problem with 'trading the averages' like the numbers Hirsch has calculated... the averages are almost always skewed by a few very nasty outliers. Said another way, if you take out the worst (anomalous) 5% of instances - as most statisticians would - what you would likely get is a positive average monthly return for September. To put my theory to the test, I went back and calculated the returns for every September going back to 1950, not just to find the average return for all those Septembers, but also to poke and prod the whole data set. [I've always told you I'm a data junkie.] Care to guess what I found? September's typical results were still bad no matter how much I tried to weed out what could be considered unfair bearish influences. In fact, September is the only calendar month since 1950 that has seen a loss more often than a gain, with 33 losers to 28 winners. There's no way to 'massage' the negative returns out of results like that. Bottom line? September really does suck. It would actually be unusual to see a bullish September. Color me surprised, but I'm not going to argue the data. Putting It All Together Great, but what does any of the history lesson have to do with you and the market right now? I think it just bolsters the short-term bearish case against stocks. The fact that stocks are overbought is working against them. The fact that September truly is apt to be a loser is also working against them. Throw in the occasional disappointing economic number, as we have occasionally seen for a few weeks now, and that's working against them too. Here's the thing (and I can't stress this enough)... we can't read more into a weak September than what it is, which is just a bad month at a time when the broad market is a little more vulnerable than usual. That's it. Nothing more. In some ways, getting the needed dip out of the way would be a good thing. Like I said yesterday, I'm looking at any dip as a buying opportunity for what should be a strong Q4, wondering if the current month is also going to mark the end of a cyclical lull. But, I AM still looking for a dip. If the need for a pullback just happens to coincide with a calendar tendency, then so much the better - we can kill two birds with one stone and make the Q4 rally even bigger.