The weak window is over. Is the best quarter next?

The Liquidity Map · Stock report

The weak window is over. Is the best quarter next?

The weak window on the S&P is ending with the September low still intact.

The 10-year yield is back at its 2007 level, and small caps are paying for it.

Historically, what comes next is the quarter that ended positive in 16 of the last 19 midterm election years.

October 1st, 2026 · 6 min read

Key takeaways

The September 16th low of 7,508 still holds, but the higher low isn't confirmed: the S&P closed on September 30th at 7,652, right at the day's low.
The Nasdaq 100 set a record high on September 22nd, less than 10 points above its June high, then pulled back.
The 3-month yield climbed to 4.25-4.28%. The market is now pricing in the chance of another Fed hike on October 28th.
The 10-year yield is at 5.29%, back at its 2007 level. The Russell 2000 is 8.9% below its high.
Since 1950, the final quarter of midterm election years has been positive in 16 of 19 years, with an average gain of 6.6%.
My 8,000-8,100 zone is a level to watch, not a target: +4.6% to +5.9% from here, below the midterm-year average.
I expect a bigger S&P correction in early 2027, not this year.

The weak window I was watching on the S&P is closing right about now.

It brought a 3.9% drop, from the August high to the September 16th low. And that low still holds.

What matters now is what comes next.

Historically, the final quarter of a midterm election year has been one of the best of the whole cycle.

I ran the numbers on 76 years of data.

But first, the three questions I closed last week's report with.

Definition

Midterm election year

In the United States, two years after a presidential election, voters elect Congress again. These are the midterms, and this year they fall on November 3rd. For the stock market they matter as a calendar marker: historically, the months before them have been nervous, and the months after them among the best of the whole four-year cycle.

The check

The low holds. The high was barely cleared

First question: does the S&P put in a higher low above 7,508?

So far, the September 16th low holds.

After it, the S&P climbed to 7,782 on September 22nd, then fell three days in a row.

On September 30th it closed at 7,652, right at the day's low.

A higher low isn't declared. It's confirmed when price turns back up from above 7,508.

So I'm still waiting.

The second question was about the Nasdaq 100 and its June high of 30,762.

It topped that on September 22nd, at 30,771.

Not even ten points.

Then it pulled back 1.2%, and the S&P didn't follow it higher.

A new high that doesn't follow through isn't a sign of strength yet. It's a test the market hasn't passed.

7,508The S&P's September 16th intraday low. As long as it holds, the setup for a higher low is intact.

The S&P 500 since August. The 7,508 low holds, and the gold band is my 8,000-8,100 level through year-end.

The third question is the one that matters most right now: does the 3-month yield reach the 4.2-4.3% range?

Yields

Rates are rising, and small caps are paying

It did. The 3-month yield is at 4.25-4.28%, right inside the range I was watching.

The 3-month yield is where the market bets on the Fed's next move.

And right now it's saying another hike on October 28th is on the table.

At the same time, the 10-year yield closed at 5.29%, back at its 2007 level.

High yields don't stop the stock market. They just change who wins and who pays.

I explained why a higher rate doesn't scare me in the September 20th macro report.

Yields are rising precisely because bonds are being sold. Money isn't fleeing into them, and the S&P finished the quarter up 2%.

Higher rates hit small companies hardest, because they borrow at a higher cost than the giants.

The Russell 2000 lost 7.5% in the quarter and is 8.9% below its August high.

The equal-weight S&P, where every company counts the same, is 6.9% below its high.

That doesn't change my view on small caps.

Their moment comes in 2027, as I wrote when I explained why 2027 is the year.

5.29%The US 10-year Treasury yield at the September 30th close. Above its October 2023 peak.

The 10-year yield since 2006. The 2023 peak has been surpassed, and today's level matches 2007.

With rates at these levels, we're entering the last quarter of the year. And its history is worth a look.

History

16 out of 19: the final quarter of midterm years

I took every midterm election year since 1950.

There are 19 of them, from 1950 to 2022.

For each one, I measured what the S&P did from September 30th to December 31st.

In 16 of the 19 years, the quarter was positive.

The average was +6.6%, and the median +7.9%.

For comparison, the average of all fourth quarters since 1950 is +4.2%.

Stretch the window to June 30th of the following year, and the midterm average reaches +20.1%, against +4.9% in the other years.

My 8,000-8,100 level means +4.6% to +5.9% from here. That's below both the average and the median of midterm years.

Applied to today's S&P, the median would mean roughly 8,250.

I don't treat it as a target. I treat it as confirmation that my level doesn't require anything out of the ordinary.

19 years don't make a law. They're a tailwind, not a guarantee.

Now, the three negative years: 1978, 1994 and 2018.

In all three, the Fed was raising rates.

But 2022 was also a year of hikes, and its final quarter brought +7.1%.

So another hike doesn't cancel the pattern. But it's still the risk I'm watching.

The second risk comes from a small market.

Smaller markets often turn before the big ones. One I follow closely, Romania's BET index, is already more than 15% below its August 19th high, and in 2024-2025 it corrected before the S&P.

That's why I think the S&P will also see a bigger correction than September's 3.9%.

Just not this year.

More likely, I see it in early 2027, and after that the uptrend continues.

Until then, I'm also watching Bitcoin, which fell before the S&P in recent corrections. Its cycle lows have historically come between November and January, as I explain in my September 30th video.

16 of 19Midterm election years since 1950 in which the S&P finished the final quarter in positive territory.

The S&P 500 in the final quarter of every midterm election year, 1950-2022. The gold band is my 8,000-8,100 level, measured from the September 30th close.

On positions, the plan is the same as last week.

How we're positioned

On the S&P, the plan is unchanged: a long after a higher low above 7,508, with 8,000-8,100 as the year-end level we're watching.

On MicroStrategy we keep the breakout position. In the $175-200 zone, we take profits on most of it.

MARA and CleanSpark fell 15% and 11%, respectively, this week.

For a position built in tranches, that doesn't change the plan. Part of the capital is already in, the rest goes in gradually.

On FuelCell and PayPal, we don't exit at a set price. If they sit still too long, we cut the position in half.

On SpaceX, nothing new: patience, no rush.

Conclusions

The weak window passed without breaking the September low.

The higher low still needs confirming.

Yields are high, and small caps feel it the most.

History says a good quarter comes next.

And my level asks for less than midterm years delivered on average.

I expect the bigger correction in early 2027, not now.

What to watch this week

Does the S&P turn back up from above 7,508, confirming the higher low?
Does the 10-year yield push clearly above 5.3%, or stall here?
Does the 3-month yield hold at 4.25% heading into the Fed's October 28th meeting?

The weak window is over. Is the best quarter next?

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