Is The Market Scared Of Creepy Clowns? S&P 500 On Track For One Of The Worst Months Of 2016

The markets seem to have a caught a cold in October, as the month is set to have the dubious distinction of being one of the worst performing months of 2016.

Crests and troughs are quite the norm of any cycle, so why is the October performance raising an alarm? October is typically a better performing month for the markets. Argus highlighted that since 1980, the S&P 500 Index was in the green 25 times and down just 10 times, translating to 71 percentage in favor of a gain.

Argus also noted that the capital appreciation in October averages 1.44 percent for the S&P 500 Index since 1980, with only April, November and December having better monthly averages.

Weak October Portending November Negative Surprise?

With October surprising to the downside, some see the trend to play out in November, given it's a raucous Presidential-election year. Argus noted that historically, one half of the average gain for the S&P 500 comes in the fourth quarter, with the average capital appreciation for the quarter at 4.6 percent. However, in Presidential election years, Argus noted that the metric falls to 0.5 percent.

Earnings Giving Small Lift

Stronger than expected third quarter earnings have given the market a slightly better tone in the past week, although not enough to lift it off its central tendency around 2,150.

Recap of S&P Performance Thus Far – Technical Perspective

Argus noted that the S&P 500 Index enjoyed its best stretch of the year between mid-July and the first week of September, with the index trading in the 2,175-2,190 range in mid-August and remaining poised for a break above to new highs.

However, since hitting 2,180 on August 9, the index fell to 2,125 on September 14. With a series of jagged lower highs and lower lows following, the 50-day SMA remained above the 20-day SMA following the latter's break below the former on September 16.

The index rose above its 20-day SMA on October 24, and Argus sees the 50-day MA at 2,160 to be the next target. However, to get there, we might need some more good earnings.