Is the S&P 500 bracing for more pain in September? This is what history tells us

The market is in retreat, having given up the advantage it gained in mid-June. Federal Reserve Chairman Jerome Powell spooked the market on Friday with his comments on inflation and the monetary policy outlook.

With the end of the second quarter reporting season, the market is entering a period of calm, characterized by very few catalysts for trading. The S&P 500 index hit a 52-week low of 3,636.87 on June 17 before beginning a rally. From this low, the index reached a high of 4,325.28 on August 16, a low of around 19%.

He has since backed off. The larger gauge has yet to turn black for the year and is down about 15% year-to-date.

Past performance dampens hopes: September is historically a not so positive month for equities. The S&P 500 posted an average loss of about 1% in September, Barron's reported, citing data dating back to 1928.

Data shared by the Trend Spider trading platform confirms the same. Apple Inc AAPL closed down 70% of the time in September, the platform said on Twitter. This doesn't bode well for the S&P 500, given that Apple has a 7.4% weighting in the index.

Investors also started pricing in more near-term declines. Net short positions against S&P 500 futures have risen in recent months to their highest level in about two years, the Wall Street Journal said in a report. Invesco QQQ Trust QQQ, an exchange-traded fund that tracks leading technology stocks, also saw short interest rise to around $25 billion or 14% of its free float in the 30 days ending Wednesday, according to the report, citing data. S3 partners.

See also: How Much $1,000 Invested in Apple, Amazon, Bitcoin, and Gold After Friday's Drop Are Worth Returning to historic highs

Cryptos could face a similar situation: Cryptocurrencies, which bottomed long before the equity market, have come under significant selling pressure this year. BitcoinBTC/USD, the crypto apex, is down to the sub-$20,000 level, well off its all-time highs of $68,789.63 reached on November 10, 2021.

September was the worst month for Bitcoin since 2013, with the crypto falling in seven out of nine years, according to Coinglass data, fund manager Gary Black said. The average price drop in September is minus 6%. Black noted that the trend is similar to what is seen in the stock market, which has averaged a decline of 0.7% over the past twenty-five years.

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Incoming data is key: Leading up to the Federal Open Market Committee meeting in September, investors can digest a monthly jobs report and an inflation report. This data could largely influence the Fed's decision. Right now, Fed officials are announcing another 75 basis point hike in the federal funds rate.

Cleveland Federal Reserve Chair Loretta Mester reportedly told Reuters on Saturday that the extent of the rate hike at the September meeting will depend on inflation data being released meanwhile. It would see the policy rate slightly above 4% early next year and then stay at that level through 2023.

The SPDR S&P 500 ETF Trust SPY closed Friday's session down 3.38% at 405.31, according to data from Benzinga Pro.

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