The stock market just entered its weakest 10-day stretch of the year

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The stock market just entered its weakest 10-day stretch of the year
A trader works on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., March 5, 2020.Andrew Kelly/Reuters
  • The stock market just entered its weakest 10-day stretch of the year, according to Bank of America.
  • The bank highlighted that the last 10 days of September are especially weak when the first half of the month is down.
  • But seasonal data suggests the stock market can recover and have a better year-end after it escapes September.
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The S&P 500 just entered its weakest 10-day stretch of the year, according to seasonality data from Bank of America.

The bank highlighted that the last 10 days of September are typically poor for stock market returns, and they're even worse when the S&P 500 traded lower in the first half of the month.

"The weak start to September does not bode well for the bullish seasonality scenario that we highlighted entering the month. The S&P 500 dropped 1.27% over the first 10 sessions of September, which is well below the average first 10 days of September return of -0.36%," Bank of America technical analyst Stephen Suttmeier said in a Tuesday note.

With the last 10-trading day stretch of September having kicked off on Monday, investors shouldn't be surprised if stock prices trend lower.

Suttmeier highlighted that historically the stock market has only been up 40% of the time with an average return of -1.11% during the last 10 days of September. Those return figures get even worse when stocks were down for the first half of the month, like they were this year, with stocks up only 41% of the time with an average return of -1.66%.

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"The S&P 500 continues to struggle over the last 10 sessions of the month of September, particularly when the first 10 days of the month are below average," Suttmeier said.

The S&P 500 is already down 0.60% so far this week. And for investors that are looking to buy the decline in stocks, they might be better off waiting until October, according to the note.

"October has its share of big down days, but these down days often provide an opportunity for dip buyers ahead of better seasonality from November through January," Suttmeier said.

For potential support levels, Suttmeier is monitoring the 4,415, 4,325, and 4,195 levels on the S&P 500, which represents potential downside of as much as 5% from current levels.

With no major support levels having yet been broken in the stock market, Suttmeier maintains his bullish tilts towards equities, with the view that the S&P 500 is still in a secular bull market that could last for a few more years.

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