The month of October already has a bad reputation on Wall Street, because it has heralded the historic market crashes of 1929, 1987 and 2008. The facts tell us that over the long term, October’s performance has been about average. However, analysts can be a superstitious bunch and they’re on edge right now.

October this year certainly got off to a bumpy start. As Halloween approaches on the calendar, should investors be spooked?

CNN’s Fear & Greed Index, which tracks seven market indicators, has sunk to an “Extreme Fear” reading of 22. The CBOE Volatility Index (VIX), aka “fear index,” has soared in recent days and hovers at 19, knocking on the door of the pivotal threshold of 20.

A reading of the VIX above 20 indicates that the markets during the next 30 days will experience markedly higher volatility.

Read This Story: Vexed By The VIX

The benchmark SPDR S&P 500 ETF Trust (SPY) has slipped below its 50-day moving average and it’s dropping close to its 200-day moving average (see chart).

Moving averages denote momentum, up or down. The broad stock market is clearly losing momentum.

The benchmark 10-year U.S. Treasury note shot past 4.80% on Friday, well above its multi-year resistance level of 4.50%. Some analysts think the yield could actually rise to 5% or higher, due to stickier than expected inflation. If that happens, it would stress out global equity markets.

The latest U.S. employment reports continue to show a tight labor market, combined with a decelerating but resilient economy.

When good news is bad news…

Wall Street is often a perverse place, where good news on the economy can actually be bad news for investors.

In a worrisome sign of continued inflationary pressures, U.S. payrolls grew by 336,000 on a seasonally adjusted basis in September, the Labor Department reported on Friday. The gain in jobs, nearly double consensus expectations, underscored the labor market’s strength and the economy’s overall vibrancy despite elevate interest rates.

The unemployment rate was 3.8% last month, unchanged from August, as joblessness edged back near record lows. The report renewed fears of interest rates staying higher for longer. U.S. stocks sank on the news.

The continued strength of the labor market, in particular, has prompted the Fed to maintain a hawkish stance, despite its recent pause in tightening. “Don’t fight the Fed” is a time-honored mantra that’s worth heeding.

Stocks rallied during the summer, as investors refused to believe that the Fed would follow through on its tough talk. Investors don’t doubt the Fed’s inflation-fighting resolve anymore.

In a bright spot in the war against inflation, crude oil prices have been slumping in recent days to settle in the low $80s/bbl. A recent unexpected spike in gasoline inventories has weighed on crude prices, together with worries about China’s troubled economy.

The U.S. Energy Information Administration reported this week that gasoline inventories added a significant 6.5 million barrels for the week to September 29, versus a build of 1 million barrels for the previous week. Gasoline inventories are currently 1% above the five-year average for this time of year. Accordingly, the energy sector has moved lower.

The surge in oil prices over the past several months has been a key factor in the recent uptick in headline inflation. A lasting pullback in oil prices would disappoint energy investors but please consumers, central bankers, and the overall stock market.

How should you trade during the fraught month of October? Seek defensive growth. Stick to companies with strong balance sheets, growing earnings, and quality products that address long-term human needs.

Over the long haul, markets exhibit an upward bias and the cream rises to the top. But for the short term, expect more turbulence and down days. Look for value and safety; gravitate to defensive sectors such as health care and consumer staples.

I often engage in sardonic banter on Slack with my friend and colleague, Dr. Joe Duarte, who serves as chief investment strategist of our premium trading service, Profit Catalyst Alert.

Joe sent me this message yesterday:

When it comes to trading stocks, humility is the key to longevity. That’s because no matter what the Fed does, or what happens in Washington or anywhere in the world, the most certain thing that can be said about the stock market is that it excels at one thing above all: contradicting the consensus opinion on Wall Street. It’s usually when bearish sentiment climbs that proverbial wall of worry to seemingly never-ending heights that profitable buying opportunities develop.

Amen, brother.

In fact, Dr. Duarte has just pinpointed a tiny, unknown company that has developed a revolutionary “black box” technology. You need to get in on the ground floor of this game-changing opportunity before the investment herd finds out and sends the share price soaring. Click here for details.

John Persinos is the editorial director of Investing Daily.

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