Analyst: S&P 500 Breaks Below Key Technical Support Level As It Enters Its Most Bearish Period Of The Year

The SPDR S&P 500 ETF Trust SPY traded lower by 0.1% on Monday after a horrendous performance last week. Investors were spooked by a higher-than expected CPI inflation number, and Bank of America analyst Stephen Suttmeier said Friday that the next couple of weeks may 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 the market will re-test its June low of 3,636.

"However, the projection for a break below the uptrend line from June would not rule out a probe into the 3400 handle (3435), which means that the risk has increased for the SPX to undercut its secular bull market support (stress test level) at the rising 200-week MA near 3580," he said.

Seasonal Weakness Ahead: To make matters worse, the second half of September has historically been the worst period of the year for the S&P 500. In particular, he said the last 10 days of the month, which began on Monday, are very bearish. Since 1928, the S&P 500 has traded higher only 40% of the time during that 10-day stretch and has averaged about a 1% decline.

In addition, the Bloomberg US Financial Conditions Index has stalled since August, which could be a leading bearish indicator for the S&P 500.

Benzinga's Take: The market will likely experience some volatility this week on Wednesday when 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 may be difficult for it to find support during its historically weakest period of the year.