When everyone is selling, it presents a great opportunity to buy. Despite an unfavorable week for the S&P 500, the capital flow from money market funds totaling $24.6 billion into U.S. equity funds with $28.1 billion is a strong indication of the underlying strength of the uptrend. Investors continue to use dips in the broad stock index as buying opportunities, even if they are doing so less openly than before.

Weekly Performance of the S&P 500

October is a time for reassessment. The stock market had long been dismissing negatives such as the government shutdown and excessively high fundamental valuations, including P/E ratios. At the midpoint of autumn, investors have become more cautious. The escalation of the U.S.-China trade war came as a thunderbolt for the S&P 500. However, the "Sell America" strategy quickly gave way to TACO.

It's no surprise that Donald Trump's conciliatory rhetoric near the end of the week, by October 17, allowed the S&P 500 to lick its wounds. The President remarked that the U.S. is getting along with China and confirmed that the planned meeting with Xi Jinping will take place this month. That was enough to ease tensions slightly, though fear still lingers in the equity market.

"If you want peace, prepare for war." Investors are actively buying utility stocks, healthcare, and consumer staples—sectors that perform best during downturns. In contrast, shares of regional banks, airlines, retailers, and real estate companies have come under heavy selling pressure. These typically lead during economic booms in the U.S.

Performance of Regional Bank Equity ETFs

During the COVID-19 pandemic, much debate revolved around what the recovery in U.S. GDP would look like. V- or U-shaped recoveries implied rapid or gradual growth. An L-shaped recovery suggested a prolonged period of sluggish expansion. There was also the concept of a K-shaped recovery, where some sectors rebound and others do not. The latter scenario is now being considered by investors in making sector-specific buying decisions.

Support for the S&P 500 is also stemming from the Federal Open Market Committee's intention to continue the monetary easing cycle, even in the absence of full data. The shutdown has delayed the release of crucial reports, such as the U.S. jobs data for September and inflation figures. Nonetheless, Fed officials are unanimously signaling a federal funds rate cut in October. For example, St. Louis Fed President Alberto Musalem stated that continued monetary expansion is needed to support the cooling labor market.

October reaffirms its reputation as the most volatile month of the year for the broad equity index. When will the consolidation end?

Technically, the daily S&P 500 chart shows mixed dynamics, indicating uncertainty. Only a breakout from the 6550–6720 trading range will allow the market to determine its next directional move.