The recent upward trend of the S&P 500 index came to an abrupt halt. Jonathan Krinsky, a technical strategist at BTIG, issued a warning last Sunday: as seasonal headwinds pressure the stock market in early October, market volatility may exhibit a pattern of "slow accumulation followed by sudden eruption."

In his client report, he specifically noted that the S&P 500 index closed below the 20-day moving average—a key technical support level—for the first time in weeks last Friday. Given the lack of substantial price cushion before the index reached its yearly high near 6,100 points, he believes the market may face the risk of a rapid pullback.

Last Friday, impacted by the Trump administration's new round of tariff policies and unexpectedly weak non-farm payroll data, investors grew more concerned about the economic outlook. The S&P 500 index fell approximately 1.6% in a single day, closing at 6,238.01 points.

Krinsky reminded clients of the risks through historical data: just a year ago, the S&P 500 index had retreated 8% from its peak in the first three trading days of August. He analyzed that if this round of adjustment can quickly reclaim the 6,100-point mark, a 5% drop from the peak could present an initial buying opportunity.

Regarding the August market, Krinsky outlined five key observations:

First, the seasonal weak period is approaching. Early August to early October is typically considered the weakest phase of the year, with a significantly increased probability of a pullback.

Second, software and semiconductor stocks are diverging. The IGV index tracking the software sector has underperformed the semiconductor index ETF (SMH.US) by about 17% since early May. However, the current ratio is nearing a technical support level. Combined with the historical trend of software stocks outperforming semiconductors in August in five consecutive years and nine out of the past 13 years, there may be a mean reversion opportunity.

Third, the utilities sector continues to strengthen. The Utilities Select Sector SPDR (XLU.US) hit a 52-week high last week, further highlighting its defensive attributes.

Fourth, the homebuilder sector benefits from declining interest rates. Unless economic data deteriorates sharply, the upward trend in this sector is likely to continue.

Fifth, restaurant and trucking stocks are under significant pressure. Restaurant stocks like Bloomin' Brands (BLMN.US), Dutch Bros (BROS.US), Denny's (DENN.US), and Jack in the Box (JACK.US) failed to break previous highs this summer, with their relative strength indicators falling to multi-year lows. The trucking sector has even hit new relative lows.

Overall, Krinsky maintains a cautious yet opportunistic strategy: although the S&P 500 index may test 6,100 points in the short term, if historical patterns repeat, the adjustment could present a buying window. Allocations are recommended to tilt toward software, utilities, and homebuilder sectors while avoiding weaker areas like restaurants and trucking.