Week Ahead: Older Market Worries Back In Focus: Inflation, Earnings,

• October is historically the most volatile month for markets, though broader Q4 often most profitable
• Q3 earnings from an array of US companies may pull the spotlight back to inflation

Metrics released on Friday showed a faster pace of growth than expected in September for US and PMIs. Stocks received an additional boost from news of the phase-3 trial success of Merck’s (NYSE:) . However, it’s likely that investor focus will return to worries about , along with Federal Reserve tightening as the spotlight shines on company results in the week ahead with earnings season on the horizon.

Adding to potential market jitters—this coming Friday’s monthly print, a key release for the US economy, along with the delayed, but not yet concluded, legislative tussle over the US debt ceiling. As well, markets are still contending with ongoing worries about China’s Evergrande Group (OTC:) (HK:), as the giant real estate developer continues to struggle with its massive debt overload. In short, there are a plethora of themes that could pressure markets as the first full week of October trading commences.

Mixed Forecasts, Market Jitters, Possible SPX Reversal

Mad Money’s Jim Cramer expects profit-taking will weigh on shares as quarterly earnings—which could reflect some of the worst days of the pandemic—are released. Other analysts point to the October Effect, an accepted perception that equity markets generally decline during the month, on added volatility, even as the fourth quarter, which starts in October, often provides positive returns overall.

Yet other strategists are forecasting rising equities, perhaps even fresh records, despite the Fed beginning to withdraw stimulus and the pandemic continuing to constrain global supply chains, an additional inflation trigger.

According to CFRA Research, since WWII, the Index, gained 3.9% on average during the fourth quarter and was positive 80% of the time. That would make Q4 the best quarter of the year during the period studied.

However, even if the broad benchmark matched or exceeded those statistics, to reap those gains in 2021 investors would still have to weather the historically tumultuous month of October, which saw 36% higher volatility when compared to other months of the year.

There are already signs of the expected oscillation currently visible via the tug-of-war between supply and demand on the S&P 500, whose medium-term trajectory may have reversed.

The SPX completed a small H&S top, as the benchmark fell below the 100 DMA for the first time in almost a year, since late October 2020. The price remains below the 50 DMA, which has been a natural uptrend line for much of the time since crossing above it in April 2020.

The RSI fell below its support line since February 2020. The recent equity rise may well be nothing more than part of a return move, providing traders with an opportunity for a short at an optimum entry.

Though were flat, the 10 remaining S&P 500 sectors finished in the green…