October is known for big drawdowns and charts suggest a 'capitulation event' is likely, says Bank of America

A capitulation event is likely in October before stocks can ride a year-end rally, according to Bank of America. Investors are coming off the worst month of the year for the S & P 500 and Nasdaq Composite . They lost 4.9% and 5.8% in September, respectively. There may be more challenges for traders in October, which has a reputation for its big intramonth drawdowns, BofA technical research strategist Stephen Suttmeier wrote in a Friday note.

What's more, the strategist pointed out the rebound off of last week's low of 4,238 did not correspond with capitulation with the 3-month VIX relative to the VIX. The Cboe 3-Month Volatility Index and Cboe Volatility Index are used in tandem to measure volatility in the S & P 500. The former gauges the S & P 500's implied volatility over three months, while the latter reflects the index's 30-day volatility.

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October is known for big drawdowns and charts suggest a 'capitulation event' is likely, says Bank of AmericaThe bank's Stephen Suttmeier expects there's more downside risk for the S&P 500 in what's historically been a choppy month for stocks.
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