U.S. Stock Market Hits New High, Faces Seasonal Risk Window, August to October Could Be a Key Test Period

August 5th. After hitting a new all-time high, the U.S. stock market is entering its seasonally weak period. According to Ned Davis Research (NDR)'s cycle model, August to October is usually one of the weakest three months of the year for the S&P 500 Index, leading investors to start considering whether the market faces a risk of a correction.

However, NDR believes that seasonal factors are not enough to change the current market trend. The institution stated that investor sentiment remains cautious, market breadth has improved, and the asset allocation model continues to be positive on stocks. Currently, the NDR model recommends a 70% allocation to equities, higher than the benchmark level of 55%.

On the fundamentals side, corporate earnings continue to support the U.S. stock market. So far, about 300 S&P 500 companies have reported earnings, with 85% of them beating expectations, and the overall profit growth is expected to exceed 47%. NDR believes that as long as the U.S. economy remains resilient and AI investment continues to drive corporate earnings growth, there is still room for further upside in the stock market.

Market sentiment has also been a key factor supporting the rise. NDR data shows that short-term trading sentiment briefly fell into the "extreme pessimism" zone in early August but has rebounded to a neutral level with the market rally. Historical experience has shown that extreme pessimism often indicates that selling pressure is approaching its end, potentially leading to funds flowing back into the stock market.

Meanwhile, AI trading is picking up again. With the rebound of large-cap tech stocks, investors are buying bullish options again, and market makers are buying stocks to hedge risks, further creating an upward feedback mechanism.

However, market concerns are also building up. A recent rare phenomenon of the S&P 500 rising along with the VIX fear index surging has emerged. On Tuesday, the S&P 500 rose by 1.8%, marking its largest single-day gain since April, but the VIX index still rose by 2.9% to 16.47.

Analysts warn that if the combination of "rising stock market and increasing volatility" persists, it may indicate that the market is approaching a critical turning point. Crowded AI trades, options positions, and a high valuation environment could amplify market volatility when sentiment reverses.