BTIG’s Krinsky says S&P 500 might slip toward 6,100 on seasonal weakness

BTIG technical strategist Jonathan Krinsky warns that S&P 500 volatility is poised to return following the index's recent close below its 20-day moving average and a 1.6% drop to 6,238.01 on Friday, driven by new tariffs and a weak jobs report. He anticipates a swift pullback to the 6,100 level, citing historical seasonal weakness from August to early October, but suggests this could present a buying opportunity. Krinsky recommends positioning in software, utilities, and home builders, while advising caution on underperforming restaurant and trucking sectors.

Analysis

The S&P 500's recent uptrend has been interrupted, with the index falling 1.6% to 6,238.01 and closing below its 20-day moving average for the first time in weeks, a key technical breakdown noted by BTIG. This move is attributed to a combination of new tariffs and a weak jobs report, exacerbating concerns about seasonal headwinds that historically pressure equities from August through early October. BTIG's technical analysis suggests a lack of meaningful price support until the February highs around the 6,100 level, implying a potential swift 5% pullback from the peak. While this near-term outlook is cautious, the strategist views such a drop as a potential buying opportunity. The report identifies distinct sector-level divergences: a potential mean-reversion trade favoring software (IGV) over semiconductors (SMH) is highlighted, given software's 17% underperformance since May and historical strength in August. Defensively, the Utilities sector (XLU) is favored after hitting a 52-week high with improving relative strength, while home builders are seen as supported by lower interest rates. Conversely, a bearish view is taken on restaurants (BLMN, BROS, DENN, JACK) and trucking stocks, which are showing severe relative weakness and making new lows.

Key Decisions for Investors

• Investors should prepare for heightened volatility and a potential S&P 500 pullback toward the 6,100 level, which could present a tactical buying opportunity based on historical seasonal patterns.
• Consider rotating into sectors with favorable technical setups, such as overweighting software (IGV) relative to semiconductors (SMH) for a potential mean-reversion trade and increasing exposure to defensive utilities (XLU) for their relative strength.
• It may be prudent to reduce or avoid exposure to sectors showing significant relative weakness and failing to make new highs, specifically restaurant and trucking stocks.
• Monitor interest rate trends closely, as their direction is a key supportive factor for the home-builder sector and could influence broader market sentiment.