Trading Game Plan Revealed - 2025-10-01: Window Dressing Ends: October

As the calendar flips to a new quarter, the market is presented with a clean slate, stripped of the artificial forces that often dominate the final days of a reporting period. The phenomenon known as "window dressing," where fund managers bid up their best-performing stocks to enhance client statements, has concluded. Now, a different reality sets in. In this morning's Trading Game Plan show, Gareth Soloway, Chief Market Strategist at Verified Investing, broke down why this quarterly transition could usher in a period of significant volatility and a potential market downturn of as much as 10% in October.

The End of the "Window Dressing" Illusion

At the end of every quarter, a predictable pattern emerges in the markets. Institutional funds, eager to present the most attractive portfolio to their clients, actively buy the stocks that have performed the best over the preceding three months. This creates a surge of artificial demand, pushing already high-flying stocks even higher. As Gareth explained, this is a key reason for the late-September strength in certain names.

"When you saw Robinhood continuing up and we see all these other stocks that have been big, big performers in the quarter going up in the last few days, that again is window dressing, no doubt about it."

However, this dynamic reverses sharply as the new quarter begins. The pressure to buy evaporates, and a new calculus takes over for fund managers.

"Now the beautiful thing about today and going forward is it's a clean slate… you had very little selling of best performers in the quarter end and buying in fact was going on… and now that we're in the new quarter, you're going to have a lack of buyers and most likely sellers."

This creates a powerful headwind for the market. Managers who felt certain stocks were overvalued but held off on selling to avoid spoiling their quarterly reports are now free to take profits. This potential wave of institutional selling, combined with a sudden lack of institutional buying, forms the basis for a bearish outlook as we head deeper into October.

A 10% Correction on the Horizon?

With the artificial support of window dressing removed, the market's true technical posture comes into focus. The S&P 500 is currently caught in a tightening wedge pattern, a technical formation that indicates contracting volatility and typically precedes a major directional breakout. The key levels to watch are support around 6,600 and resistance near 6,740. Given the fundamental shift in market dynamics, the resolution of this pattern could be to the downside.

Gareth has been clear about the potential magnitude of this move: "I've gone on record and said I think we could fall as much as 10% in October here for the month."

A 10% correction would be a significant event, resetting valuations and shaking investor confidence. The catalyst isn't a single piece of news but rather the unwinding of quarterly positioning. This is a structural shift in money flow that traders must respect. The S&P 500 has been consolidating for weeks, and the start of a new quarter provides the perfect trigger for the next major leg. As Gareth noted, it would be "unbelievably rare" for the market to remain within this tight range for another full month, suggesting a decisive move is imminent.

Decoding Economic Data and Market Narratives

While market structure is paramount, economic data provides crucial context. This morning's ADP private sector jobs report showed a loss of 32,000 jobs, starkly contrasting with expectations for a 45,000 gain. In an environment where government data is increasingly questioned, this private-sector report carries significant weight.

"If you look back at ADP private sector data which is done by a private company… this number has actually been much more accurate… to me this is now most likely going to become the gold standard of what the labor market is doing."

A weakening labor market could force the Federal Reserve's hand on interest rates, but it also points toward a potential recession, a major negative for corporate earnings and stock prices.

Meanwhile, the media is focused on the government shutdown. While this creates uncertainty, historical data suggests its market impact is often overstated. The market is a forward-looking mechanism that anticipates an eventual resolution. While the shutdown may be a convenient scapegoat for any sell-off, the underlying cause is more likely the post-window dressing institutional selling. The shutdown's primary impact may be seen in safe-haven assets like gold and Bitcoin, which have seen recent bids as investors seek alternatives to US dollar-denominated assets amid the political disarray.

Identifying Quarter-Turn Opportunities

The end of window dressing doesn't just present a broad market thesis; it creates specific, actionable trade ideas. The strategy involves looking for stocks that were likely manipulated by these quarterly flows.

Potential "Window Undressing" Shorts: Stocks that saw parabolic runs into the quarter's end are prime candidates for a pullback. Robinhood (HOOD), which is up an astounding 285% for the year, faces major technical resistance in the $145 to $146 range. Similarly, a reversal signal has already appeared on the chart of Sandisk.

"What's this candle formation called?… that is a daily topping tail, it's a reversal bearish signal. So this should put in a top until proven otherwise."

Larger companies like STX ($50 billion market cap) and WDC ($40 billion market cap) were even more likely to be involved in window dressing due to their liquidity, making them key stocks to watch for weakness.

Potential Bounce-Back Longs: On the flip side, some stocks may have been victims of "window undressing"—the act of fund managers selling their worst performers before the quarter ends. Keurig Dr Pepper (KDP) is a prime example. The stock of this profitable, dividend-paying company has been beaten down for six straight weeks. With the selling pressure now removed, it could be poised for a significant bounce as value-oriented buyers step in.

Bitcoin's Moment of Truth at $118,200

In the crypto space, Bitcoin is at a critical technical juncture. While it is currently pushing through a near-term down-sloping trendline, a far more formidable resistance looms ahead. This is the "big kahuna," a multi-year trendline connecting the bull market highs of 2017, 2021, 2024, and 2025. This line currently sits at approximately $118,200.

"This one is the big kahuna. This one's the big boy… if we can confirm above that level then I think you make all-time highs. But this one my friends, that's the one."

A simple close above this level is not enough. As history shows, the market requires confirmation—a subsequent candle that holds above the breakout level—to validate the move. A confirmed break above $118,200 would signal a potential run to new all-time highs. However, until that happens, this level represents the most significant technical barrier for Bitcoin bulls.

The Trader's Mindset: Probabilities Over Predictions

Ultimately, navigating a complex market environment comes down to discipline and mindset. The earnings report from Nike served as a perfect lesson. The stock's post-earnings move failed to reach Gareth's predefined buy or sell levels, resulting in no trade. This is not a failure, but a success in discipline.

"It's okay to miss the trade or to not have it come to your level when you are in a game of high probability trading. Remember it's not about getting in as many trades as you can, that's gambling."

Successful trading is not about being right 100% of the time or finding "no-brainer" trades. Such thinking leads to over-leveraging and catastrophic losses. Instead, it's about consistently putting the probabilities in your favor.

"I always go into a trade saying okay this is where probability says there should be resistance but again it's just probability meaning it favors that it doesn't guarantee that and that's again so so important."

By studying the charts, identifying multi-factor support and resistance zones, and letting the price action dictate your decisions, it's possible to achieve a high win rate. The key is to remove emotion and ego, and to let the charts speak for themselves.

Conclusion: Brace for an October Reset

The start of the fourth quarter marks a pivotal moment for the markets. The cessation of window dressing has removed a key pillar of support, potentially opening the door for a significant correction. With the S&P 500 coiled in a tight pattern and institutional sellers likely waiting in the wings, traders should be prepared for heightened volatility.

By understanding the structural forces at play and focusing on high-probability setups—whether it's shorting over-extended momentum names or buying beaten-down value stocks—investors can navigate this challenging environment. As we move through October, a disciplined, probability-based approach will be the key to not only surviving but thriving in what could be a month of major market resets.