If September was a month that defied expectations, October might be the month that lives up to them.
All of which means another nerve-wracking ride for investors.
The first month of autumn is reliably known as the stock market's worst, but this year passed with not much more than an occasional jolt as the Standard & Poor's 500 has gained about 4 percent.
Its follow-up act in October is both "the jinx month" for its history of market crashes and a "bear killer" for its reversal of 11 bear markets since World War II, according to the Stock Trader's Almanac.
Market pros, then, have their sights set on a number of factors to watch as the fourth quarter begins and Wall Street looks to put some fundamental legs beneath the technical sprint it's been on for the past seven months.
"What we need to see now is the one step forward, two steps back now goes to one step forward," says Quincy Krosby, general market strategist at Prudential Financial. "The market needs something bigger and better to get it excited."
Among the multitude of factors likely to influence investors, here are five keys:
Second-quarter earnings pleased investors, with about a 3-to-1 upside surprise in performance over expectations. Yet projections for the third quarter are that S&P 500 companies will report an overall 15.4 percent drop in profit from a year ago.
While companies still may beat expectations, the bar is rising and the trend of cost-cutting offsetting weak revenue will have to change.
"Top-line revenue growth—that's really what investors are waiting to hear," Krosby says. "If they don't hear it enough times the market will react accordingly."
Investors may tolerate one more quarter of less-bad earnings, but the outlook and trend will be key.
"You get this sense that we could fall into a double-dip recession—a fear that's out there—but it's most likely going to keep analyst estimates low during this season's forecast," says Doug Lockwood, CIO of Cornerstone Wealth Management in Auburn, Ind. "That simply sets up the ability to have further positive earnings surprises."
2. Jobs—And Consumer Health
Unemployment remains probably the market's most critical metric, and Wall Street won't have to wait to gauge how strong consumers will be. The Labor Department is set to release its monthly jobs report on Friday, and investors will be watching closely.
"Losing jobs makes everybody nervous. If you have a job and your neighbor doesn't it still makes you nervous," says Kathy Boyle, president of Chapin Hill Advisors in New York. "The consumer's saving and they're still behind the eight ball. They don't have enough money for college, they don't have enough money for retirement."
A market bear, Boyle thinks more signs of weakness—such as Tuesday's drop in consumer sentiment—will weigh on the market in October and possibly drive a strong move lower.
By the same token, though, Wall Street cheered Monday over the spate in mergers and acquisitions activity, and a continuation in that trend could signal a turnaround for the jobs market.
"Anytime you have acceleration of mergers and acquisitions activity generally portrays that businesses are starting to hire more," Lockwood says. "You've shaken out the weak ones. They don't start doing that unless they're able to find financing or that the deals are too good to pass up."
Lockwood, who thinks October could be "flat to low-positive," says the health of luxury hotels will serve as a good barometer for where the consumer is positioned.
3. Technical Levels
Many analysts say the market's momentum has been based strongly on technical benchmarks that have been eclipsed after the market reached a strongly oversold position in March.
Similarly, some are now starting to wonder if the market hasn't reached a resistance level from which it will correct following the rally.
"Trading has picked up. That's also something that makes people nervous," Krosby says. "Once the day traders get in there, they typically come in at the end of a momentum-driven rally."
"If we have a consolidation, which is the most minor form of a pullback, that's one thing. If it's something larger than a consolidation, those riskier assets are going to sell off and sell off dramatically."
Questions about the technical aspect of the rally have heightened as the S&P has shown resistance at the 1065 level, pulling back once it passed that area.
That's not necessarily a long-term bearish sign for the market, but could signal an impending correction.
"Support remains 1014-1000 with key support at the August low of 978.50," BofA Merrill Lynch Global Research analyst MaryAnn Bartels wrote in a note to clients. "We maintain that the risk of a 15-20% correction is rising within the context of a base-building process and that the major area of resistance at 1200-1325 can be tested in 2010."
After 18 months at the center of the market firestorm, beaten-down financials have been a major player in the stocks rally.
Now, with many of the industry's biggest names seemingly back on their feet, their performance will be watched closely for clues about the broader market.
"We're watching the financial stocks very closely," Krosby says. "We don't want to see the best of breed sell off."
Analysts have been watching the yield curve—specifically, the gap between yields on the 10-year and 2-year Treasury notes—and drawing caution about what it might portend for the sector. A wide spread generally means good things for the group, but a narrowing spread, as has been happening lately, could be a sign of trouble.
5. Everything Else
Geopolitics, commodity prices, dollar moves—they're all in the mix as well as the world endures a tumultuous time of saber rattling in the Mideast, declining faith in the US currency and a health care battle at home.
"The news is still really bad, so I'm looking for a reaction in October," Boyle says. "However, there's enough money on the sidelines and these big hedge-funds are throwing these programmed buy trades in. We see a lot of business controlled by programmed trades."
Of course, that can cut both ways, as the market has found out the hard way in the 18 months preceding the March rally.
Fear is still a strong ingredient in this market environment.
"I'm in the skeptic crowd," Art Cashin, director of floor operations at UBS, told CNBC. "I think it's going to be tough for the economy to live up to the hope and hype that we've seen in some of these stocks."