Buckle Up: Why August to October Can Be the Market’s Bumpy Season

Seasonality is one of the quieter tools in a technician’s kit, but it can be surprisingly powerful. Strip away the headlines and macro debates, and a pattern remains: certain times of the year simply perform better than others. You don’t have to know exactly why for it to be useful…sometimes, “it is what it is” is enough.

Looking at the S&P 500’s seasonal trends over the last decade, one stretch stands out: August through October. September is historically the single worst month for average returns, February comes in second, and October takes a close third. August doesn’t always rank as poorly on average, but the back half often sets the tone for a volatile fall.

The Data Behind the Pattern

Over the last 10 years:

• September has the lowest average return of the year and one of the lowest rates of positive months.
• October ranks just behind, with frequent volatility spikes.
• Late August often acts as a lead-in to this weaker stretch, especially when markets are extended.

This isn’t to say the market always falls, just that the odds of choppier price action go up. Volatility tends to increase, trends can stall, and even healthy markets may retrace.

What It Means Now

We’re entering a part of the calendar where historical odds favor caution. That doesn’t mean “sell everything,” it means ensuring your portfolio can handle turbulence without forcing reactive decisions.

Consider:

• Adjusting position sizes so no single trade or sector dominates your risk.
• Tightening stops or adding hedges.
• Rotating some exposure toward defensive sectors like utilities, healthcare, or consumer staples.

The Takeaway

Seasonality won’t predict the future with certainty, but it’s valuable context. The August–October window has earned its reputation as a challenging stretch. Use this time to review allocations, check your risk controls, and stay patient. In markets, sometimes the smartest move is to prepare for the storm before you see the clouds.

S&P 500: Riding the Upper Band, But for How Long?

If we’re going to address the elephant in the room, let’s talk about the S&P 500. The weekly chart, with Bollinger Bands, RSI, and candlestick patterns, is showing a clear picture: strong momentum, stretched conditions, and signs we’re in a late-stage move.

Bollinger Bands: Extended Strength

On the weekly $SPX chart with Bollinger Bands (20,2,2):

• Price is hugging the upper band near 6466, a position held since April 2025.
• Bands have widened since April, signaling increased volatility after the sharp drop and recovery.
• The index hasn’t touched the middle band (20-week MA) since June, showing persistent buying pressure.

When price rides the upper band for this long, the first logical pullback target is the middle band, now around 6200.

Momentum Signals

• RSI is near 67–68 à strong but not overbought (70+).
• The percent of Bollinger Band Width above 0.8 confirms we’re near statistical extremes.
• Recent peaks near 1.0 have triggered brief pullbacks, not full reversals.

Candlestick Context

• April’s three strong bullish candles after the March crash marked a textbook reversal.
• Early July’s “three inside down” bearish setup failed, underscoring trend strength.
• The last two weekly candles have smaller bodies, a sign of hesitation, not yet a reversal.

Path of Least Resistance

As long as:

• RSI stays below 70
• Price holds the upper band
• No major bearish reversal pattern forms

…the trend remains upward. Still, narrowing ranges and lighter volume hint at distribution, meaning new long entries should be sized conservatively.

Bottom line: The S&P 500 remains in an extended uptrend, but it’s stretched. Watch for a rejection at the upper band as a potential first step toward a move back to the 6200 area. Until then, respect the momentum, but keep risk controls tight.

Small Caps and Deregulation: A Forgotten Corner with Fresh Potential

While headlines obsess over mega-cap tech, there’s a quieter story developing in small caps, one that could get louder if deregulation gains traction.

Industrials, healthcare, infrastructure, and communications services are among the sectors that could see real benefits from lighter regulatory burdens. And some small-cap companies are positioned to turn that policy shift into meaningful growth.

The Russell 2000, a benchmark for small-cap stocks, has lagged badly for years. But technically, it’s showing signs that a trend change may be underway.

The Technical Picture

On the weekly Russell 2000 chart:

• Price has broken above the upper band near 2,328 for the first time in years.
• Bollinger Bands are widening after a long compression phase (2022–2023), often a precursor to sustained trends.
• RSI is pushing above 60, reflecting momentum building since the March 2025 low.
• The index has formed higher lows and higher highs since April, a textbook uptrend.

Key Levels to Watch

Support:

• 2,240–2,250: recent consolidation zone
• 2,100: key psychological level
• 1,860–1,900: major multi-year support

Resistance:

• 2,380–2,400: late 2024 highs
• 2,450: all-time high from 2021

A close above 2,400–2,450 would mark a significant technical breakout.

Why Deregulation Could Be the Catalyst

Small caps often outperform when:

• The Fed is easing
• Economic growth is improving
• Investors rotate into risk-on assets

Layer in sector-specific deregulation, and the impact could be amplified:

• Industrials: Lower compliance costs free up capital for expansion.
• Healthcare: Permanent Telehealth safe harbor and less red tape.
• Infrastructure: Streamlined permitting boosts project timelines.
• Communications: Roll back for antiquated FCC rules

Bottom Line

Small caps have been in the shadows for years, but the combination of improving technicals and potential deregulation sets the stage for a shift.

The Russell 2000 still needs to clear 2,400 to confirm the breakout, but if policy winds align with price action, the next leg up in small caps could be led by the very sectors most primed to benefit from a lighter regulatory touch.

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Shared content and posted charts are intended to be used for informational and educational purposes only. The CMT Association does not offer, and this information shall not be understood or construed as, financial advice or investment recommendations. The information provided is not a substitute for advice from an investment professional. The CMT Association does not accept liability for any financial loss or damage our audience may incur.

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