An edited piece from Al Brooks. For those with mid-term market investments and wondering what might happen in the markets over the next few months.

There is a tendency for the market to have selloffs in August through October time frame. The 1929 and 1987 crash both were in October. Both crashes had more than a 10% selloff in August.

We are entering that window. Also, the Emini is overbought, and it might try to become more neutral ahead of the (US) election.

These factors favour a reversal down to the middle of the 3-year trading range within a few months.

Larry Williams, who is a well-known trader, uses his reasoning to come to a similar conclusion. He recently said that he expects the market to rally to around the old high into around July 27 and then turn down.

But why is the market still going up? Liquidity. The single most important factor over the past four months is Fed Governor Neel Kashkari’s statement on 60 Minutes in March that the Fed has “an infinite amount of cash” to protect the economy.

But as powerful as the Fed is, it will not bother to stop a 15% correction. Therefore, a pullback to 2700 can take place, despite the Fed’s proclamation.