Up until this week bearish seasonality has been non-existent this “Worst Six Months” period. After the tariff tantrum that sent the S&P 500 down 18.9% on a closing basis to the April 8 low, the market has soared for five months straight. So much for “Sell in May” this year. As we pointed out last month, “when bearish seasonality doesn’t transpire it is a bullish indication that more powerful forces are at play.” S&P 500 has logged eight new all-time highs since then in usually bearish September. This is also bullish.
Looking back at past years when S&P 500 closed at new all-time highs five or more times in September, we see subsequent performance improve even further when compared to “All Years”. The biggest improvement was in full-month September performance, jumping from a 0.68% average loss in “All Years” to a 2.76% gain. Frequency of gains in September also improved significantly from just 44% to 87.5%. November’s results also show a sizable improvement in both average gain and frequency of advance. October and December were modestly softer however, remained bullish.
Q4 performance has historically been solid but it also improved following five or more new all-time highs in September with only one loss in 8 years. There was also a reduction in the maximum drawdown during Q4. The only Q4 decline was way back in 1967.
With valuations running hot, a few disappointments from the AI Tech camp and another looming government shutdown, the market has begun to correct a tad this week during the seasonally weak period after Triple Witching quarterly options expiration (week after TWW, S&P down 27 of 35), and end of Q3 when institutions tend to restructure and window dress portfolios ahead of Q4 and yearend.
We still anticipate any pullback or retreat to be relatively brief and shallow. Afterwards the current bull market is likely to push higher adding more new all-time highs as yearend approaches. After this dip we expect a banner Q4 rally that should drive the S&P 500 up to 7100 by year-end for another 20% yearly gain right in line with our best case 2025 forecast scenario of 12-20%. It is for these reasons that we presented a basket of new stock ideas two weeks ago and are preparing for a potentially early start to the market’s Best Months.
Seasonal MACD Buy Signal Prep
This current pullback is setting up for a timely “Best Six Months” MACD Seasonal Buy Signal. As a reminder the criteria to issue our Seasonal MACD Buy Signal is:
1. A new buy signal crossover using our 8-17-9 MACD indicator AND
2. The crossover must occur on or after the first trading day of October AND
3. DJIA, S&P 500 and NASDAQ MACD indicators must all agree.
In fact, this dip has already pushed our faster moving 8-17-9 MACD indicators applied to DJIA, S&P 500 and NASDAQ into negative territory setting up for a new buy signal crossover.
Most Bullish Post-Election Pattern Tracking
As you can see from the updated S&P 500 Post-Election Seasonal Pattern Chart below, the modern history of post-election years being the best year of the 4-year cycle since 1985 powers ahead. S&P averages a gain of 18.1% in post-election years since 1985, up 9, down 1 (2001). Save a black swan event over the last few days of September S&P 500 remains on track to log its fifth consecutive monthly gain. A little late September/early October pullback could be just the pause that refreshes the bull for a substantial Q4 rally.
Great Worst Six Months No Losses in Q4
Even more bullish is the stellar Worst Six Months we are having. As of today’s close, S&P 500 is up 18.6% for the Worst Six Months May-October, which is the third best WSM since 1950. Yes, there are still 26 trading days left in the WSM, and a lot can happen in a month, especially in October. But so far, the S&P is off just 1.3% since Monday’s newest all-time closing high.
Three items stand out most in the table here of the S&P 500 Top 20 Greatest Worst Six Months. First, there are no losses in these 20 previous Q4s and the average gain is 6.64%. Then there is the yearly performance. Up 100% of the time with an average gain of 23.73%. Finally, the subsequent Best Six Months are substantially better, up an average of 9.57% vs 7.03% over the full 75 years since 1950.
Of the last four BSM losses: interest rates were high in early 1990 ahead of the recession before the FOMC began cutting rates; early 1993 weakness was driven by post-election year uncertainty with the new Clinton Administration; Russia’s invasion of Ukraine helped trigger the bear market in 2022 and the April 2025 tariff tantrum put the 2024 BSM in the red.
Our sense is that bull market is taking a short breather now. We expect the government shutdown will get resolved as it has every time. This pullback is likely to be short lived, shallow and a buy-the-dip moment. We don’t expect any substantial correction or market weakness until next year when the midterm election battles heat up. So, for now, use this current pullback to get positioned and ready for a monster Q4 rally that drives the S&P up to the vicinity of 7100 by yearend.
Pulse of the Market
DJIA continued to defy typical seasonal weakness throughout September right up until earlier this week. After closing at multiply new all-time highs (1) above 46000, DJIA has declined for three days straight. Declines have been relatively mild and DJIA is still up 0.9% this month as of its September 25 close. With a single trading day left in the historically dangerous, week after September Triple Witching options expiration, DJIA is down –0.8%.
Faster and slower moving MACD indicators applied to DJIA have been oscillating between positive and negative since September 3. The faster moving MACD Buy turned negative (2) on Wednesday September 24th. The is the MACD indicator that is used for our Seasonal MACD Buy signal. Today’s weakness has also turned the slower moving MACD Sell indicator negative, confirming DJIA’s loss of upward momentum and potentially signaling the start of the mild pullback we have been anticipating.
From the first full week of trading ending August 8, 2025, through week ending September 19, 2025, DJIA has enjoyed five weekly gains (3) of around 1% or more and just two weekly losses each less than –0.4%. NASDAQ (5) has the same record with even bigger gains, while S&P 500 (4) has advanced in six of the last seven full weeks and its single weekly loss was just one-tenth of one percent. Catalysts for this solid summer trading remain AI, Fed rate cut expectations, and persistent government spending.
Over the last four full weeks, market breadth has been tepid and somewhat concerning last week (6). Despite solid across-the-board gains from DJIA, S&P 500, and NASDAQ last week, NYSE Weekly Decliners outnumbered Weekly Advancers. This suggests that participation in the rally could be waning, which can lead to a pause or even modest market pullback. This week’s weakness appears to be the follow through.
New 52-week Highs and Lows (7) have also been giving off mixed signals. Bullishly, New Highs reached a new 2025 peak of 364 last week, but the trend of New 52-week Lows also appears to be expanding after bottoming at just 25 during the final week of August. Some of these mixed signals could be due to moves made by interest rate sensitive stocks ahead of and after the Fed’s recent interest rate cut.
Treasury bond yields have declined in response to softer economic data and the Fed’s anticipated path for additional interest rate cuts. The 90-day Treasury yield (8) appears to have nearly priced in two more 0.25% reductions from the Fed by the end of the year. The 30-year Treasury yield has also moved lower. Lower rates have historically benefited stocks as long as other data does not turn clearly negative.