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Watch for volatility in individual stocks, especially in the technology and retail sectors (or anywhere else supply chain snafus are forecast to hurting sales or production) as money managers work to position their portfolios for a chaotic third quarter earnings season that begins next week when big banks start to report on October 13.

Wall Street analysts turned decidedly sour on third quarter earnings in September. After raising earnings estimates for companies in the Standard & Poor’s 500 in July and August by 3.8%, according to FactSet, analysts cut estimates by 0.9% in September. That;’s the largest monthly decrease in the quarterly bottom-up earnings estimate for stocks in the S&P 500 since the 1.8% decrease in June 2020 at the height of the Pandemic shutdown. Five sectors recorded a drop in their earnings forecasts during the quarter with the industrials sector showing the biggest drop of 8.1%.

This leaves the market and investors in something of a quandary. The S&P 500 is still, despite a September retreat, trading near its September 2 all-time high. But recent weeks have seen warnings from auto makers to retailers to tech companies of trouble in the global supply chain that has led to a combination of delayed supply and rising costs (for shipping and for production necessities ranging from energy to computer chips.)

Warnings on revenue and earning have the potential to wipe a quick 5% off prices of stocks trading at current multiples and no investors wants to take that kind of overnight ding.

But predicting where the warnings are likely to turn up–or how dire they will be–is something of a guessing game at this point.

I’d expect Wall Street to react as it usually does: By selling at a whiff of potential bad news and then punishing a stock in the short run if a company does actually warn.

I would note, however, that there seems to be a lot of money on the sidelines just looking to buy on the dip. So any drop of 5% in one of the market favorites is likely to get wiped out relatively quickly.

My advice: Know what you want to own–so that you don’t sell on a one- or two-day panic. And know what you’d like to buy and at one price.