The S&P 500 and Nasdaq experienced their worst monthly performances of 2023 in September, with both indices falling significantly. However, October is expected to bring a new stock market rally, as it historically has the most follow-through days (FTDs) that confirm market rallies. A follow-through day is an indicator that large institutions are supporting a rally attempt and increases the likelihood of its success. October has seen 35 FTDs in the past, the highest compared to other months, and has also had the most FTDs that resulted in significant market rallies.
While October presents an opportunity for a market rally, it is important to note that the stock market often bottoms in this month. October has seen major declines in the past, sometimes compounding losses from previous months. Therefore, investors should not assume immediate gains when October begins. The article mentions famous market turning points in October, such as the 1998 bear market and the 2022 bear market, which both experienced FTDs and subsequent rallies.
Currently, a stock market rally attempt is already underway heading into October, with the major indexes bottoming on September 27. However, the gains so far have been lackluster, and there are concerns regarding a potential government shutdown. The S&P 500 and Nasdaq may trigger an FTD soon, but market conditions remain uncertain. It is important for investors to closely monitor the market for any significant developments.
