Latest News

Bullish Seasonal Trends On The Doorstep

By Mike Zaccardi, CFA, CMTMarket Overview12 minutes ago (Sep 19, 2022 10:51)

Stocks plunged 10% since mid-August
Unsettling CPI data and a worrisome FedEx earnings pre-announcement
Positive seasonality begins over the coming weeks

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

S&P 500 Daily


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 inflation fears, helping to spark a cascade of selling in both the equity and fixed-income markets. The S&P 500 dipped to 3837 last Friday while the U.S. Treasury market notched fresh 30-month lows, as measured by the iShares U.S. Treasury Bond ETF (GOVT).

Treasury Bear Market Continues



All eyes are now focused on the Fed. The market expects a 0.75 percentage point rate hike, but a full 1 percent increase cannot be ruled out. Bond traders have priced in about a one-in-five chance of a full percentage point hike while the terminal rate is seen as peaking near 4.5% by April next year.

Fed Rate Hike Probabilities

Fed Rate Hike

Source: CME Group

Meanwhile, the strength of corporate earnings is now much more in jeopardy following a bearish pre-announcement from Industrials-sector stalwart FedEx (NYSE:FDX) that sent its stock to the worst daily drop for the transports name since at least 1980. The third-quarter earnings season does not unofficially begin until the banks start reporting during the middle of October.

The good news for the bulls (and most investors who are unsettled with steep year-to-date declines on their brokerage statements)? Seasonality is about to turn from a headwind to a major tailwind.

As a technician, I recognize that seasonal trends should come second to price action. For example, if stocks are trending down, then that is a bigger factor to weigh than a historically bullish part of the calendar. Still, one cannot help but acknowledge that the fourth quarter of a mid-term election year has been the best time to get overweight stocks when looking out several quarters.

Fasten Your Seatbelts for Upward Price Action?

Dow Jones

Source: Seasonax

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

S&P 500, U.S. Midterm Elections Seasonal Patterns

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

S&P 500 Seasonality

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.

Bullish Seasonal Trends On The Doorstep

Related Articles

Week Ahead: Stocks In Holding Pattern Till FOMCByPinchas Cohen/ – Sep 18, 2022

Investors are catching on – the Fed means business
All eyes are on FOMC next Weds.
Steepening inverted yield increases likelihood of a consensus on recession
It’s official. The…

Week Ahead Economic Preview: Week Of 12 September 2022ByChris Williamson – Sep 16, 2022

A period of mourning observed to mark the death of Queen Elizabeth II takes place and means a scheduled policy meeting at the Bank of England has now been deferred to the 22nd…

Cloud Computing Continues To Exhibit Strong Growth In 2022ByAneeka Gupta – Sep 15, 2022

Christopher Gannatti, Global Head of Research, WisdomTree
When you think about cloud computing companies this year, the most likely starting point will be performance[1]:The BVP…

Our Apps

Terms And Conditions
Privacy Policy
Risk Warning

© 2007-2022 Fusion Media Limited. All Rights Reserved.

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.

What's your reaction?

In Love
Not Sure

You may also like

More in:Latest News

Leave a reply

Your email address will not be published. Required fields are marked *