Bullish Seasonal Trends On The Doorstep

It was the best of times; it was the worst of times. That’s about how it has gone for the stock market in the last few months. The S&P 500 rose nearly 20% off its mid-June low to peak at its 200-day moving average during the middle of August. A trio of upbeat narratives permeated markets back then.

For starters, second-quarter corporate earnings verified much better than analysts had expected, and guidance was not too bleak, in aggregate, for the balance of the year. Then came the July jobs report which showed stellar employment gains—of course, that came with the side item of inflationary risks. Finally, those jitters were simmered when a cooler-than-expected July CPI report hit the tape back on Aug. 10. The SPX peaked at 4325 on Aug. 16.

S&P 500: Lowest In Nearly Two Months/h2

Source: Stockcharts.com

Equities have cratered 10% from that rebound high, though. A painful message from U.S. Federal Reserve Chair Powell at Jackson Hole late last month was followed by a respectable nonfarm payrolls report earlier in September, but the bears really roared in wake of a hotter-than-expected August core CPI print.

Large consumer price increases for the previous month stoked renewed Jeff Hirsch was kind enough to share with me the updated seasonal perspective on the S&P 500 through Sept. 13. My interpretation is that there could be more pain for the next few weeks, but all seasonal signs point to a rebound shortly before the Nov. 8 elections.

Mid-Term Year Weakness Through Early Q4/h2

Source: Stock Trader's Almanac

Very near-term, the final 10 trading days of September are often very weak, according to research from BofA’s Stephen Suttmeier, using S&P 500 price data going back to 1928.

Final Third of September Fraught with Risk/h2

Source: Bank of America Global Research

The Bottom Line

After yet another options-expiration week drubbing, I expect more bearish risks to come over the near term. There’s light at the end of the tunnel, however. Seasonality turns bullish ahead of the U.S. mid-term elections through much of the pre-election year.

Disclaimer: Mike Zaccardi does not own any of the securities mentioned in this article.