September surprise? This trend-bucking pattern implies stocks will see a post-Labor Day boost

Investors may get a September to remember.

CFRA chief investment strategist Sam Stovall sees the potential for powerful gains, even though September is an erratic month for the stock market.

"Normally, September ends up being a down month," he said Tuesday on CNBC's "Futures Now." "The average return was a minus 1 percent. But what I feel is that we've had sort of a running start into September, and so maybe we end up being surprised. ... We could end up being much higher than we anticipate currently."

In his latest note, he suggested stocks could build on the record rally beyond Labor Day because of momentum.

"This positive performance has continued a trend-bucking pattern witnessed by investors since the start of the "Sell in May" period on April 29," he wrote. "This bodes favorably for the S&P 500's performance in September, which has recorded more price declines than advances."

On Tuesday, the S&P 500 briefly crossed 2,900 for the first time ever. The index is now up more than 8 percent this year. The S&P 500, Dow and Nasdaq are now on track to see their biggest August gains since 2014.

Stovall also believes the midterm elections could provide another bullish catalyst for stocks this fall.

S&P target "under review"

Stovall said his firm's 12-month S&P 500 rolling target of 3,000 is "under review" right now. But by year's end, he estimates Wall Street could see 3,100 — a 7 percent gain from current levels.

But getting there may not be smooth sailing.

"Volatility is still something that could be out there because we have gone so far, so long," Stovall said.

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