The SPDR S&P 500 ETF Trust TO SPY traded down 0.1% on Monday after an abysmal performance last week. Investors were spooked by a higher-than-expected CPI inflation figure, and the Bank of America analyst Stephen Suttmeier said on Friday that the next two weeks could be very difficult for the market.
Suttmeier said the 3,900 level for the S&P 500 was a key technical resistance level, and said there is now a real risk that the market will retest its June low of 3,636.
“However, projecting a break below the uptrend line from June would not rule out a probe into the 3400 (3435) handle, which means the risk has increased for the SPX to undermine its secular support from the bull market (resistance test level) at the rising 200-week MA near 3580,” he said.
Upcoming Seasonal Weakness: To make matters worse, the second half of September has always been the worst time of the year for the S&P 500. In particular, he said the last 10 days of the month, which started on Monday, are very bearish. Since 1928, the S&P 500 has risen only 40% of the time during that 10-day period and has averaged a decline of around 1%.
Additionally, the Bloomberg U.S. Financial Conditions Index has stalled since August, which could be a leading bearish indicator for the S&P 500.
Benzinga’s opinion: The market will likely experience some volatility this week on Wednesday as the Federal Reserve makes its interest rate decision. If investors decide to sell the news, the S&P 500 could be trading at new 2022 lows by the end of the week, and it could be difficult for it to find support during its historically weakest period of the year.