The odds are better for a good August market after July’s strong gains, but some strategists watching stock charts expect at least one more big sell cycle before the market slides higher to the end of 2022. For now, there are some overall bullish signs for the market, such as July’s roughly 13.5% gain in tech stocks, falling bond yields and improving market breadth. market. Bank of America technical strategists studied market performance in August and September after the S&P 500 posted notable gains in July. They found that after rallying at least 5% in July, the S&P 500 was higher in August 59% of the time with an average return of 2%. It was also higher in September 55% of the time with an average return of 0.7%. But in mid-term years, when July is up 5% or more, the S&P 500 is up 77% of the time in August. However, yields have been lower, averaging just 1%. In September, in those years, the S&P 500 was up 69% of the time with an average return of around 1.3% “July 2022 marks the best July of the midterm year of the presidential cycle. A positive July bodes well for August and September of the midterm year,” Bank of America strategists noted. Restless around the corner? Mark Newton, global head of Fundstrat’s technical strategy, said it expects equities to experience some turbulence in early August before the market improves later in the month and continues higher through mid -September. At this point, there is potential for more hash before a move higher at the end of the year. “I think it is likely that the first two weeks of August have the potential to be negative , and halftime should be very strong,” he said. Newton also expects the latter part of the year to be strong, with the pattern seen in many years of midterm elections. Ari Wald, head of technical analysis at Oppenheimer, said August was generally not great, but September could be worse. “I’m worried about September. We’re not there yet. It’s not that August is good. You don’t usually see much progress. It’s technically a below-average month.” he declared. Wald, however, said he was in the “market recovery camp” and the market was building. “The market continues to build on the low from the June sellout,” he said, noting that the rise in bond yields has moderated. “I think there is an upside at 4,300 in August.” But there could be another bout of selling in September that would take the market to a low that would still be above the June low of nearly 3,637. Following that move, stocks could rise in the fourth quarter, a- he added. August comes as BTIG’s Chief Market Technician, Jonathan Krinsky, doesn’t think the market has bottomed yet. He expects stocks to hit a new low over the next two months and then rally. He expects a fresh low around 3,500 on the S&P 500. But Krinsky said he could be deterred from his view that the S&P 500 hasn’t bottomed, if it were to rally. at key levels. “4,177 was the June high. July was in the June range. So if we took the June high, that would be remarkable,” he said. Strategists eyed the 4,177 level on the S&P 500 as a point of resistance. The S&P was flat at around 4,112 in Monday afternoon trading. Krinsky said if the S&P 500 was able to break past the June high, that would be positive and suggest the trend is changing. He also noted that the 50% retracement level of the full S&P 500 decline is 4,231. Typically, in a bear market, once there is a decline of 20% or more at the close , the index rarely breaks above the 50% retracement level unless it has already bottomed. “It’s hard to call July anything other than a real win for the bulls, but August is probably the real telltale,” he noted. Fundstrat’s Newton said one sector that could suffer in August is energy. He expects oil, which was down almost 5% on Monday, could continue to fall to as low as $85 a barrel. West Texas Intermediate crude futures were slightly lower at $94 a barrel in afternoon trading. “Most of the energy can be crushed in the short term,” he said. “I’m a longer-term energy bull.” But in the short term, oil is taking a technical break. “Energy will not be the place to hide in August,” Newton said.