Dow, S&P 500 end With Gains up After Bumpy Week, but Nike Drags

Athletic wear company Nike’s shares fell 6.3% and were the biggest drag on the Dow and the S&P 500 after it delivered a downbeat sales forecast and warned of delays during the holiday shopping season, blaming a supply chain crunch.

Shares of footwear retailer Foot Locker also fell sharply.

On the flip side, Facebook climbed 2% and Tesla rose 2.7%. The S&P communication services sector climbed 0.7% and was the second-biggest sector gainer of the day after energy, up 0.8%.

Stocks bounced back from a sharp selloff at the start of the week tied in part to concerns over a default by China’s Evergrande and its potential risk to global financial markets.

On Friday, Evergrande’s electric car unit warned it faced an uncertain future unless it got a swift injection of cash, the clearest sign yet that the property developer’s liquidity crisis is worsening in other parts of its business.

“You’ve had a good recovery from the lows” this week, said Rick Meckler, partner, Cherry Lane Investments, a family investment office in New Vernon, New Jersey.

“With rates this low – even if they are going to move up slowly – and with the fiscal stimulus you’ll probably see coming, I think investors still prefer stocks to any other asset class. Stocks remain in a weird way what investors see as the safe place.”

On Wednesday, the Federal Reserve said it would reduce its monthly bond purchases “soon” and half of the Fed’s policymakers projected borrowing costs will need to rise in 2022.

The Dow Jones Industrial Average rose 33.18 points, or 0.1%, to 34,798, the S&P 500 gained 6.5 points, or 0.15%, to 4,455.48 and the Nasdaq Composite dropped 4.55 points, or 0.03%, to 15,047.70.

For the week, the Dow was up 0.6%, the S&P 500 gained 0.5% and the Nasdaq was near flat.

Shares of cryptocurrency-related firms Coinbase Global, MicroStrategy Inc, Riot Blockchain and Marathon Patent Group fell after China’s central bank put a ban on crypto trading and mining.

“It’s been a very volatile week to say the least, so I think going into the last week of September the volatility is likely to continue especially with the end-of-the-quarter window dressing,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.

Investors are also looking for signs of progress on President Joe Biden’s spending and budget bills.

Declining issues outnumbered advancing ones on the NYSE by a 1.50-to-1 ratio; on Nasdaq, a 1.40-to-1 ratio favored decliners.

The S&P 500 posted 21 new 52-week highs and 6 new lows; the Nasdaq Composite recorded 82 new highs and 73 new lows.

Volume on U.S. exchanges was 9.00 billion shares, compared with the 10.11 billion average for the full session over the last 20 trading days.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Caroline Valetkevitch; additional reporting by Devik Jain in Bengaluru; Editing by Maju Samuel and David Gregorio)

Europe Shares Fall, Wall St Pauses as Evergrande Fears Hover; U.S. Yields Rise

MSCI’s gauge of stocks across the globe shed 0.20% after three days of gains, leaving it little changed for the week.

Concern over whether distress at Evergrande could spill into the broader economy has hovered over markets this week. Evergrande’s electric car unit warned it faced an uncertain future unless it got a swift injection of cash, the clearest sign yet that the property developer’s liquidity crisis is worsening in other parts of its business.

“You look back on this week and there is a lot for global markets to digest,” said Matthew Miskin, co-chief investment strategist at John Hancock Investment Management.

“There is still not clarity on how China will address the cracks in their credit markets.”

On Wall Street, the Dow Jones Industrial Average fell 4.97 points, or 0.01%, to 34,759.85, the S&P 500 gained 1.89 points, or 0.04%, to 4,450.87 and the Nasdaq Composite dropped 22.91 points, or 0.15%, to 15,029.34.

Gains in S&P 500 cyclical sectors such as financials and energy countered declines for the tech and healthcare groups.

The pan-European STOXX 600 index lost 0.90% as weak German business confidence data also weighed.

“Some of the hesitancy in European markets could also be put down to the German elections, which promise to be the most interesting in some time,” said Chris Beauchamp, chief market analyst at IG.

Investors were also assessing a busy week of central bank meetings around the world, including arguably more hawkish stances from the U.S. Federal Reserve, as well as from policymakers in Britain and Norway.

Yields on benchmark U.S. 10-year Treasury notes hit their highest level since July 2. The notes fell 13/32 in price to yield 1.4526%, from 1.41% late on Thursday.

“A week of central bank action has shown us that policymakers are ready to move toward reining in on loose monetary policies introduced during the pandemic,” ING analysts wrote in a note to clients.

The dollar index rose 0.22% and was on track for a third straight week of gains, with the euro down 0.19% to $1.1714. The Japanese yen weakened 0.39% versus the greenback at 110.75 per dollar.

Oil prices rose, with Brent up to a near three-year high, supported by global output disruptions and inventory draws.

U.S. crude rose 0.93% to $73.98 per barrel and Brent was at $77.97, up 0.93% on the day.

Spot gold added 0.5% to $1,750.92 an ounce.

For a look at all of today’s economic events, check out our economic calendar.

(Additional reporting by Anushka Trivedi, Sruthi Shankar and Shreyashi Sanyal in Bengaluru, Alun John in Hong Kong, Dhara Ranasinghe, Elizabeth Howcroft and Marc Jones in London; Editing by Robert Birsel, Chizu Nomiyama, Andrew Heavens and Dan Grebler)

Indexes Close Higher as Investors Assess Fed News

Upbeat outlooks from Accenture and Salesforce helped to bolster the market, while the U.S. Food and Drug Administration late Wednesday authorized a booster dose of the Pfizer-BioNTech COVID-19 vaccine for those 65 and older.

Also helping sentiment, concern about a ripple effect from China Evergrande continued to ease.

The Fed said on Wednesday it could begin reducing its monthly bond purchases by as soon as November, and that interest rates could rise quicker than expected by next year. The November deadline was largely priced in by markets.

In a press conference after the statement, Fed Chair Jerome Powell said the bar for lifting rates from zero is much higher than for tapering.

“This is a follow-on rally from a very good Fed meeting,” said Tim Ghriskey, chief investment strategist at Inverness Counsel in New York.

“To me that showed there were no surprises and things were as expected,” he said. “Any Fed rate hike is still quite a ways off and so much can change between now and then.”

Energy and financial stocks were the S&P sectors gaining most ground.

Unofficially, the Dow Jones Industrial Average rose 502.55 points, or 1.47%, to 34,760.87, the S&P 500 gained 52.84 points, or 1.20%, to 4,448.48 and the Nasdaq Composite added 151.28 points, or 1.02%, to 15,048.13.

Shares of IT services provider Salesforce jumped and the company was a big boost to the S&P and the Dow during the session after it raised its annual earnings forecast.

Accenture gained after the IT consulting firm boosted its first-quarter outlook.

Concerns eased further over a potential default by Chinese property developer Evergrande even as Reuters reported that some holders of the firm’s dollar bonds had given up hope of getting a coupon payment by a key Thursday deadline.

Investors shrugged off data showing sluggish business activity growth and a rise in jobless claims, in line with expectations for a slowdown in economic growth in the third quarter.

During the session the S&P 500 broke above its 50-day moving average, after trading below the indicator for three full sessions – its biggest such breach since early March.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Caroline Valetkevitch in New York; Additional reporting by Ambar Warrick in Bengaluru; Editing by Maju Samuel and Lisa Shumaker)

Stocks Surge, Dollar Sags as Investor Risk Appetite Expands

Wall Street’s S&P 500 surged well over 1% following solid gains for European markets.

MSCI’s gauge of stocks across the globe jumped 1.06%. As it gained for a third session, the index had recovered all its losses from Monday, when it posted its biggest percentage drop in two months.

Safe-haven trades faded after benefiting earlier in the week, with gold prices dropping.

“We are seeing markets rally on the premise that while the situation in China particularly with Evergrande is not going away, the outcome is not perhaps going to be as severe or prompt some form of contagion that was originally feared,” said Craig Fehr, investment strategist at Edward Jones.

“You combine that with the fact that the tone that the Fed struck yesterday at its meeting suggests that while a reduction in stimulus is certainly coming, the Fed is not particularly eager to start tightening policy dramatically in the near term.”

The Fed said on Wednesday it will likely begin reducing its monthly bond purchases as soon as November and signalled interest rate increases may follow more quickly than expected as the U.S. central bank’s turn from pandemic crisis policies gains momentum.

In Hong Kong, shares of debt-laden property group Evergrande jumped 18% ahead of a key debt payment deadline. Fears the group’s distress could spill into the broad economy helped spark an equity sell-off to start the week.

On Wall Street, the Dow Jones Industrial Average rose 544.68 points, or 1.59%, to 34,803, the S&P 500 gained 59.11 points, or 1.34%, to 4,454.75 and the Nasdaq Composite added 146.28 points, or 0.98%, to 15,043.13.

The pan-European STOXX 600 index rose 0.93%.

Norway’s central bank raised its benchmark interest rate and said it expects to hike again in December, joining a short but growing list of nations moving away from emergency-level borrowing costs. Norway’s crown strengthened to its highest level since mid-June versus the euro.

In other currency trading, the dollar index fell 0.492% after hitting a one-month high earlier, with the euro up 0.49% to $1.1743. The Japanese yen weakened 0.34% versus the greenback at 110.15 per dollar.

Sterling was last trading at $1.3743, up 0.87% on the day, after the Bank of England said two of its policymakers had voted for an early end to pandemic-era government bond buying and markets brought forward their expectations of an interest rate rise to March.

Benchmark 10-year notes last fell 21/32 in price to yield 1.401%, from 1.331% late on Wednesday. Key Euro area bond yields also climbed after the hawkish signals from major central banks.

Oil prices rose, supported by growing fuel demand and a draw in U.S. crude inventories as production remained hampered in the Gulf of Mexico after two hurricanes.

U.S. crude gained 1.59% to $73.38 per barrel and Brent was at $77.25, up 1.39% on the day.

Spot gold dropped 1% to $1,749.66 an ounce.

For a look at all of today’s economic events, check out our economic calendar.

(Additional reporting by Sujata Rao in London and Alun John in Hong Kong; Editing by Hugh Lawson, Alex Richardson, Steve Orlofsky and Catherine Evans)

Wall St Ends Higher as Fed Signals Bond-Buying Taper Soon

Trading was choppy, however, following the Fed’s latest policy statement, in which the central bank also suggested interest rate increases may follow more quickly than expected.

Overall indicators in the economy “have continued to strengthen,” the Fed said.

Bank shares rose following the news.

Stocks were already sharply higher before the statement from the Fed, with stocks bouncing back as concerns eased over a default by China’s Evergrande.

Strategists said what eventually happens with tightening may be less hawkish than some expect.

“I don’t think the Fed’s tightening is going to be anywhere near as hawkish as they anticipate. It’s going to be hard for them to execute on this plan as the economy slows next year,” said Joseph LaVorgna, Americas chief economist at Natixis in New York.

Unofficially, the Dow Jones Industrial Average rose 341.11 points, or 1.01%, to 34,260.95, the S&P 500 gained 41.54 points, or 0.95%, to 4,395.73 and the Nasdaq Composite added 150.45 points, or 1.02%, to 14,896.85.

Evergrande’s main unit said it had negotiated a deal with bondholders to settle interest payments on a domestic bond, calming fears of an imminent default that could unleash global financial chaos.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Caroline Valetkevithc; additional reporting by Ambar Warrick and Medha Singh in Bengaluru; Editing by Maju Samuel and Lisa Shumaker)

Stocks Hold Gains, Dollar Strengthens After Fed Flags Taper Soon

Asset price moves were volatile following the Fed’s latest policy statement, in which the central bank also signaled interest rate increases may follow more quickly than expected.

“It’s probably a little bit more hawkish than many would have anticipated basically acknowledging that should the economy continue to grow as we have seen it would warrant a tapering to occur,” said Sam Stovall, chief investment strategist at CFRA Research in New York.

Stocks had been stronger earlier in the session, as investors already were scooping up equities as market jitters around property developer China Evergrande eased.

Evergrande agreed to settle interest payments on a domestic bond, while the Chinese central bank injected cash into the banking system, soothing fears of imminent contagion from the debt-laden property developer that had pressured equities and other riskier assets at the start of the week.

MSCI’s gauge of stocks across the globe gained 0.65%, bouncing back for a second day after it logged its biggest one-day percentage drop in two months on Monday.

On Wall Street, the Dow Jones Industrial Average rose 382.01 points, or 1.13%, to 34,301.85, the S&P 500 gained 42.06 points, or 0.97%, to 4,396.25 and the Nasdaq Composite added 125.46 points, or 0.85%, to 14,871.86.

The pan-European STOXX 600 index rose 0.99%.

In currency trading, the dollar index rose 0.132%, with the euro down 0.13% to $1.1708.

Benchmark U.S. 10-year notes last fell 1/32 in price to yield 1.3277%, from 1.324% late on Tuesday.

Oil prices climbed after U.S. crude stocks fell to their lowest levels in three years as refining activity recovered from recent storms.

U.S. crude rose 2.26% to $72.08 per barrel and Brent was at $76.05, up 2.27% on the day.

Spot gold dropped 0.2% to $1,770.30 an ounce.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Tom Wilson in London; additional reporting by Sinead Carew and Stephen Culp in New York, Tom Westbrook in Singapore and Anushka Trivedi in Bengaluru; editing by Sam Holmes and Alistair Bell)

S&P500 – Expect Volatility Upon FOMC Release

The S&P 500 index fell the lowest since July 20 on Monday, as it reached the daily low of 4,305.91. It was 239.9 points or 5.28% below the September 2 record high of 4,545.85. We’ve witnessed an intraday rebound as the market closed around 52 points above the daily low. And on Tuesday it got back to the 4,400 price level before closing 0.08% lower, at 4,354.19.

The nearest important support level of the broad stock market index is now at 4,300-4,330 and the next support level is at 4,200. On the other hand, the nearest important resistance level is now at 4,400-4,450, marked by the previous support level. The S&P 500 broke below its over four-month-long upward trend line, as we can see on the daily chart (chart by courtesy of http://stockcharts.com):

Medium-Term Downward Reversal or Just a Correction?

The S&P 500 index broke below its medium-term upward trend line a few weeks ago. On Monday it fell to the nearest important support level is of 4,300, as we can see on the weekly chart:

Dow Jones Remains Relatively Weak

Let’s take a look at the Dow Jones Industrial Average chart. In early September the blue-chip index broke below a two-month-long rising wedge downward reversal pattern. It remained relatively weaker in August – September, as it didn’t reach new record high like the S&P 500 and the Nasdaq. And on Monday it fell below its July local low of around 33,740 before bouncing back to the 34,000 mark. The resistance level is now at 34,000-34,500, and the support level remains at around 33,500, as we can see on the daily chart:

Apple Is At the Previous Local lows

Apple stock weighs around 6.3% in the S&P 500 index, so it is important for the whole broad stock market picture. In early September it reached a new record high of $157.26. And since then it has been declining. So it looked like a bull trap trading action. On Monday the stock sold off to the previous local lows along $142 price level. They act as a support level. On the other hand, the resistance level is at around $145-146, marked by the recent local lows.

Conclusion

On Monday, the S&P 500 index accelerated the downtrend from the early September record high and yesterday it bounced to the 4,400 price level before closing virtually flat. It looked like a short-covering rally and a short-term upward correction. Today, we will have the important FOMC release at 2:00 p.m. We will likely see an increased volatility and the index may fluctuate within its Monday’s daily trading range.

There have been no confirmed positive signals so far. Therefore, we think that the short position is justified from the risk/reward perspective.

Here’s the breakdown:

  • The market accelerated its downtrend on Monday, as the S&P 500 index got close to 4,300 level.
  • Our speculative short position is still justified from the risk/reward perspective.
  • We are expecting some more downward pressure and a correction to 4,200-4,250 level.

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Thank you.

For a look at all of today’s economic events, check out our economic calendar.

Paul Rejczak,
Stock Trading Strategist
Sunshine Profits: Effective Investments through Diligence and Care

* * * * *

The information above represents analyses and opinions of Paul Rejczak & Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. At the time of writing, we base our opinions and analyses on facts and data sourced from respective essays and their authors. Although formed on top of careful research and reputably accurate sources, Paul Rejczak and his associates cannot guarantee the reported data’s accuracy and thoroughness. The opinions published above neither recommend nor offer any securities transaction. Mr. Rejczak is not a Registered Securities Advisor. By reading his reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Paul Rejczak, Sunshine Profits’ employees, affiliates as well as their family members may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

Did The Global Markets Rollover In April/May 2021? What Next? Part II

Although the US markets continued to trend higher after that peak, the global markets, as well as a number of key indicators, suggested the bullish price trend had reached a peak and started to weaken after the April/May 2021 peak.

My assumption is this data shows the markets entered a highly speculative phase of trading after the November 2020 elections. History shows us that the 12+ months prior to a US Presidential election are usually filled with uncertainty and sideways market volatility. Then, just after the US Presidential election is completed, the markets usually enter into a trending phase related to the expectations and promises of the newly elected US President. 2020 was no different in this process. What was different was the fact that the US Federal Reserve was still pouring trillions into supporting the post-COVID global economic recovery. So this post US Presidential election rally may have become a super-charged speculative rally phase with the US Fed backing the trends.

The one key chart this highlights the April/May 2021 peak is the Weekly NYSE New Highs. The data on this chart suggests the NYSE moved into a period of hyper-bullish trending near the end of 2020 and continued to push to extreme highs in April/May 2021. After the peak level on this chart, in early May 2021, the NYSE new highs collapsed by more than 80% in less than 15 days. This represents an incredible reversal of sentiment for traders/investors at a time when the US stock market had just completed Q1:2021 earnings updates. Almost as if traders/investors decided “that’s it, the party’s over.” and started pulling assets away from the markets to protect profits.

https://www.thetechnicaltraders.com/wp-content/uploads/2021/09/NYSE_NewHighs_W_F.png

In the first part of this research article, we suggested reviewing a few of our earlier research posts to get a better understand of how this market trend set up. I’ll share them here:

  • November 27, 2020: HOW TO SPOT THE END OF AN EXCESS PHASE – PART II
  • May 20, 2021: BITCOIN COMPLETES PHASE #3 OF EXCESS PHASE TOP PATTERN – WHAT NEXT?
  • May 23, 2021: US DOLLAR BREAKS BELOW 90 – CONTINUE TO CONFIRM DEPRECIATION CYCLE PHASE

Most importantly, this research article highlights the transition into the new Depreciation Price Cycle and the fact that it should last until 2029 to 2031.

Moving onto current market charts and setups, we want to focus your attention on the IWP, Russell Midcap Growth ETF, Weekly chart, and the weakening market trend and price pattern that was set up recently. Not only are we seeing very weak volume in a bullish price trend pushing to new all-time highs, but we are also seeing a divergence between price and the RSI indicator suggesting this current peak is actually setting up as a potential FINAL peak in trend.

The Russell MidCap Growth ETF is uniquely positioned to reflect moderate price trending, potentially before the S&P or NASDAQ, because it reflects a broad swath of the market in terms of types of companies and a variety of industries/services. Watching the setups in the MidCaps and/or the Russell 2000 can often provide insight to major market trends and setups that are not evident in the NASDAQ or S&P 500. This is because many traders focus assets and perceptions into the US major indexes at a greater scale – often ignoring what is taking place in the Russell 2000 or the Russell Midcap Growth ETF. Therefore, we can often see a different perspective by watching these outlier symbols and price setups.

https://www.thetechnicaltraders.com/wp-content/uploads/2021/09/IWP_MidCap_W_F.png

Our Custom Smart Cash Index Weekly chart presents a very clear image of the peak in April/Pay 2021 and also presents a very clear downside price rotation in the US/Global markets after that peak. We’ve drawn a BLUE LINE showing the April/May peak and a RED ARROW showing how this Custom Smart Cash Index has declined over the past 5+ months. The strength of the decline in price on this chart seems completely opposite to the rally on the IWP chart (above). How could the US/Global markets be representing moderate price weakness on the Custom Smart Cash Index chart, while still showing moderate bullish price trending on the IWP chart?

My interpretation of these two charts, in combination with the chart I shared in the first part of this research article, suggests the US and global markets were diverging in trend. While the US markets continued to push higher and higher, as traders continued to chase the bullish price expectations related to US economic strength and recovery, the global markets and the internal dynamics of this bullish price trend had completely diverged from the trends we were seeing in the US major indexes. Almost like the momentum of a slowing train – the US markets continued to trend higher while the true momentum of the markets showed a downward price trend was already taking place.

At some point in the near future, this diverging price trend is going to push the US markets lower or the global markets will find eventual support and attempt to climb higher. This divergence suggests the US markets were acting in a manner that is counter to the global market trends – which was likely the result of the US Federal Reserve continuing to support the markets with asset-buying programs and expectations the US government would step into ease COVID related economic concerns.

https://www.thetechnicaltraders.com/wp-content/uploads/2021/09/SmartCash_W_F.png

The reality of the current market environment is that these continued US Federal Reserve and US Government efforts to support the US economy can’t and won’t last forever. Eventually, the US and global markets need to function on real economic data and processes. The end of the extreme support efforts will likely cause the markets to revert towards more true valuation levels and potentially prompt a breakdown in this extended bullish price trend.

I’ve warned about this many times over the past few months with various research articles and my expectations that a post-COVID diminishing Sine Wave structure would present a rolling, sometimes volatile, series of future economic data points throughout the world. As the markets attempt to return to normal economic functions, excessive credit and debt within the global markets will become an issue.

Rolling economic data points will present some very interesting and concerning forward guidance for traders and investors. We’ve seen incredibly positive economic data points over the past 5+ months because of the COVID-19 collapse in the global economy. These extreme rally higher will certainly be followed by a reversion process over the next few months. Eventually, the global markets will be forced to transition to more normal market dynamic processes – which may represent a moderately large price reversion event in the near future.

https://www.thetechnicaltraders.com/wp-content/uploads/2021/09/CovidSineStructre.png

As a technical trader, I love being able to share these unique and informative research articles with you. I see the markets continuing to have extended volatility over the next 24+ months with the potential for big rallies and pullbacks taking place. As much as that may scare some people, I see it as an incredible opportunity for big profits.

Big trends and increased volatility in a post-COVID normalization of the global economy are going to allow the markets to revalue and restore assets in a way that will provide an incredible growth phase for the markets (eventually). As I’ve explained in previous articles, the COVID-19 disruption was a major disruption to the global market economic process. It was big and disrupted nearly every economy on the planet. Now, in a post-COVID world, the markets will digest the extreme stimulus and support that has pushed most indexes higher over time and revert back to more normal economic functions. Eventually, all of this new capitalization and support will settle into proper economic purpose – driving a massive growth of global GDP (much like what happened after WWII). When we get to that point, we should see a massive growth phase in the global markets that may last 15+ years or more.

Please take a minute to learn about my BAN Trader Pro newsletter service and how it can help you identify and trade better sector setups.  My team and I have built this strategy to help us identify the strongest and best trade setups in any market sector.  Every day, we deliver these setups to our subscribers along with the BAN Trader Pro system trades.  You owe it to yourself to see how simple it is to trade 30% to 40% of the time to generate incredible results.

As something entirely new, check out my initiative URLYstart to learn more about the youth entrepreneurship program I am developing. This is an online program of gamified entrepreneurship designed to introduce and inspire youth to start their own businesses. Click-by-click, each student will be guided from their initial idea, through the startup process all the way to their first sale and beyond. Along the way, our students will learn life lessons such as communication, perseverance, goal setting, teamwork, and more. My team and I are passionate about this project and want to reach as many people as possible!

Have a great day!

For a look at all of today’s economic events, check out our economic calendar.

Chris Vermeulen
Chief Market Strategist

 

Wall Street Ends Near Flat on Cautious Note Ahead of Fed

Concerns over China Evergrande Group have put investors on edge amid coronavirus and economic growth worries.

Persistent default fears overshadowed efforts by Evergrande’s chairman to boost confidence in the firm on Tuesday, while Beijing showed no signs it would intervene to stem any effects across the global economy.

“People have been preconditioned to buy pullbacks for most of the last year plus,” said Michael James, managing director of equity trading at Wedbush Securities in Los Angeles.

“But that overhead nervousness is still there,” he said. “The Evergrande situation is still a black cloud hanging over global markets. Combine that with uncertainty with Fed commentary coming tomorrow, and there’s a reluctance to get overly aggressive on the long side.”

Investors are waiting for the end of this week’s Fed meeting that may shed light on when its massive purchase of government debt will begin to ease.

Officials will reveal new projections as investors also are on alert for any timing on rate tightening.

Unofficially, the Dow Jones Industrial Average fell 47.93 points, or 0.14%, to 33,922.54, the S&P 500 lost 3.58 points, or 0.08%, to 4,354.15 and the Nasdaq Composite added 32.50 points, or 0.22%, to 14,746.40.

The S&P 500 index traded below its 50-day moving average, its first major breach in more than six months. The average has served as a floor of sorts for the index this year.

Analysts say a breach of the index’s 200-day moving average is now in sight.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Caroline Valetkevitch; additional reporting by Sagarika Jaisinghani and Ambar Warrick in Bengaluru; Editing by Anil D’Silva and Lisa Shumaker)

Wall Street Ends Sharply Lower in Broad Sell-Off

The Nasdaq fell to its lowest level in about a month, and Microsoft Corp, Alphabet Inc, Amazon.com Inc, Apple Inc, Facebook Inc and Tesla Inc were among the biggest drags on the index as well as the S&P 500.

All 11 major S&P 500 sectors were lower, with economically sensitive groups like energy down the most.

Investors also were nervous ahead of the Federal Reserve’s policy meeting this week.

The banking sub-index dropped sharply while U.S. Treasury prices rose as worries about the possible default of Evergrande appeared to affect the broader market.

“You kind of knew that when there was something that caught markets off guard, that it was going to lead to probably a bigger sell-off and you didn’t know what the reason would be,” said Sameer Samana, senior global market strategist at Wells Fargo Investment Institute.

“I guess it’s the China news but… it’s not altogether surprising given how bullish people were.”

Wednesday will bring the results of the Fed’s policy meeting, where the central bank is expected to lay the groundwork for a tapering, although the consensus is for an actual announcement to be delayed until the November or December meetings.

Unofficially, the Dow Jones Industrial Average fell 620.22 points, or 1.79%, to 33,964.66, the S&P 500 lost 75.28 points, or 1.70%, to 4,357.71 and the Nasdaq Composite dropped 325.95 points, or 2.17%, to 14,718.02.

The S&P 500 is down sharply from its intra-day record high hit on Sept. 2 and is on track to snap a seven-month winning streak.

Strategists at Morgan Stanley said they expected a 10% correction in the S&P 500 as the Fed starts to unwind its monetary support, adding that signs of stalling economic growth could deepen it to 20%.

The CBOE volatility index, known as Wall Street’s fear gauge, rose.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Caroline Valetkevitch in New York; additional reporting by Devik Jain and Sagarika Jaisinghani in Bengaluru and by Noel Randewich in San Francisco; Editing by Sriraj Kalluvila and Lisa Shumaker)

S&P 500 Is Poised to Open Much Lower, Is This a Dip-buying Opportunity?

The broad stock market index broke below its short-term consolidation on Friday, as the S&P 500 index fell below its recent local lows along 4,450 price level. On September 2 the index reached a new record high of 4,545.85. Since then it has lost almost 120 points. This morning stocks are expected to open much lower following big declines in Asia and Europe after news about Evergrande Real Estate Group crisis in China.

The nearest important support level of the broad stock market index is now at 4,300-4,350 and the next support level is at 4,200. On the other hand, the nearest important resistance level is now at 4,400-4,450, marked by the previous support level. The S&P 500 broke below its over four-month-long upward trend line, as we can see on the daily chart (chart by courtesy of http://stockcharts.com):

Dow Jones Is Leading Lower

Let’s take a look at the Dow Jones Industrial Average chart. The blue-chip index broke below a potential two-month-long rising wedge downward reversal pattern recently. It remained relatively weaker in August – September, as it didn’t reach a new record high like the S&P 500 and the Nasdaq. Today it may sell off to 34,000 level or lower. The next support level is at around 33,250-33,500 and the resistance level is at 34,500, marked by the recent support level, as we can see on the daily chart:

Apple Breaks Below Upward Trend Line

Apple stock weighs around 6.3% in the S&P 500 index, so it is important for the whole broad stock market picture. In early September it reached a new record high of $157.26. And since then it has been declining. So it looked like a bull trap trading action. We can still see negative technical divergences between the price and indicators and a potential topping pattern. The stock is breaking below an over two-month-long upward trend line.

September Last Year – S&P 500 Fell Almost 11%

In 2020, the S&P 500 index reached a local high of 3,588.11 on September 2 and in just three weeks it fell 10.6% to local low of 3,209.45 on September 24. This year, September’s downward correction has started from the new record high of 4,545.85 on September 3, so there is a striking similarity between those two trading actions.

Conclusion

The S&P 500 index broke below its short-term consolidation on Friday and today it will most likely accelerate the downtrend from the early September record high. However, later in the day we may see some short-term/ intraday bottoming trading action.

The market seems overbought, and we may see some more profound downward correction soon. Therefore, we think that the short position is justified from the risk/reward perspective.

Here’s the breakdown:

  • The market is extending its downtrend today, as the S&P 500 index is likely to open much below 4,400 level.
  • Our speculative short position is still justified from the risk/reward perspective.
  • We are expecting a 5% or bigger correction from the record high.

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Thank you.

For a look at all of today’s economic events, check out our economic calendar.

Paul Rejczak,
Stock Trading Strategist
Sunshine Profits: Effective Investments through Diligence and Care

* * * * *

The information above represents analyses and opinions of Paul Rejczak & Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. At the time of writing, we base our opinions and analyses on facts and data sourced from respective essays and their authors. Although formed on top of careful research and reputably accurate sources, Paul Rejczak and his associates cannot guarantee the reported data’s accuracy and thoroughness. The opinions published above neither recommend nor offer any securities transaction. Mr. Rejczak is not a Registered Securities Advisor. By reading his reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Paul Rejczak, Sunshine Profits’ employees, affiliates as well as their family members may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

Wall Street Closes Rollercoaster Week Sharply Lower

All three major U.S. stock indexes lost ground, with the Nasdaq Composite Index’s weighed down as rising U.S. Treasury yields pressured market-leading growth stocks.

They also posted weekly losses, with the S&P index suffering its biggest two-week drop since February.

“The market is struggling with prospects for tighter fiscal policy due to tax increases, and tighter monetary policy due to Fed tapering,” said David Carter, chief investment officer at Lenox Wealth Advisors in New York.

“Equity markets are also a little softer due to today’s weak Consumer Sentiment data,” Carter added. “It’s triggering concerns that the Delta variant could slow economic growth.”

A potential hike in corporate taxes could eat into earnings also weigh on markets, with leading Democrats seeking to raise the top tax rate on corporations to 26.5% from the current 21%.

While consumer sentiment steadied this month it remains depressed, according to a University of Michigan report, as Americans postpone purchases while inflation remains high.

Inflation is likely to be a major issue next week, when the Federal Open Markets Committee holds its two-day monetary policy meeting. Market participants will be watching closely for changes in nuance which could signal a shift in the Fed’s tapering timeline.

“It has been a week of mixed economic data and we are focused clearly on what will come out of the Fed meeting next week,” said Bill Northey, senior investment director at U.S. Bank Wealth Management in Helena, Montana.

The Dow Jones Industrial Average fell 166.44 points, or 0.48%, to 34,584.88; the S&P 500 lost 40.76 points, or 0.91%, at 4,432.99; and the Nasdaq Composite dropped 137.96 points, or 0.91%, to 15,043.97.

The S&P 500 ended below its 50-day moving average, which in recent history has proven a rather sturdy support level.

Of the 11 major sectors in the S&P 500, all but healthcare ended in the red, with materials and utilities suffering the biggest percentage drops.

COVID vaccine manufacturers Pfizer Inc and Moderna Inc dropped 1.3% and 2.4%, respectively, as U.S. health officials moved the debate over booster doses to a panel of independent experts.

U.S. Steel Corp shed 8.0% after it unveiled a $3 billion mini-mill investment plan.

Robinhood Markets Inc rose 1.0% after Cathie Wood’s ARK Invest bought $14.7 million worth of shares in the trading platform.

Volume and volatility spiked toward the end of the session due to “triple witching,” which is the quarterly, simultaneous expiration of stock options, stock index futures, and stock index options contracts.

Volume on U.S. exchanges was 15.51 billion shares, compared with the 9.70 billion average over the last 20 trading days.

Declining issues outnumbered advancing ones on the NYSE by a 1.97-to-1 ratio; on Nasdaq, a 1.00-to-1 ratio favored advancers.

The S&P 500 posted seven new 52-week highs and two new lows; the Nasdaq Composite recorded 67 new highs and 82 new lows.

(Reporting by Stephen Culp; Additional reporting by Krystal Hu in New York and Ambar Warrick in Bengaluru; Editing by Richard Chang)

Did The Global Markets Rollover In April/May 2021? What Next? Part I

This research article is designed to answer a few questions related to the current market contraction and the news related to the potential US Fed tightening of monetary policy while it appears China may be experiencing a credit/debt crisis in the early stages. Many traders/investors are contacting us asking our opinions of the current market situation and what we expect in the near future. This article should help answer a lot of your questions and help you to understand what may come next.

Broad Market Cycles Transitioned Near The End Of 2019 – Were You Paying Attention?

First, let’s discuss the broader market cycles that have changed over the past 24+ months. My research team published these articles suggesting the US and Global markets had recently transitioned away from an Appreciation price cycle and into a new Depreciation price cycle. This is very important to understand because the new Depreciation price cycle will likely change how investors perceive opportunities and how currencies fluctuate in an attempt to revalue after an extensive Appreciation price phase. The US Federal Reserve and global central banks have pushed the reflation trade (pre and post-COVID) well beyond a traditional Supply/Demand Equilibrium.

Most importantly, this research article highlights the transition into the new Depreciation Price Cycle and the fact that it should last until 2029 to 2031…

  • November 27, 2020: HOW TO SPOT THE END OF AN EXCESS PHASE – PART II
  • May 20, 2021: BITCOIN COMPLETES PHASE #3 OF EXCESS PHASE TOP PATTERN – WHAT NEXT?
  • May 23, 2021: US DOLLAR BREAKS BELOW 90 – CONTINUE TO CONFIRM DEPRECIATION CYCLE PHASE

https://www.thetechnicaltraders.com/wp-content/uploads/2021/09/Article.jpg

What is important to understand about this transition between cycle phases is that it is usually associated with an “Excess Phase Price Event”. This is most commonly seen as a euphoric price rally phase, or a bubble rally phase, that drives incredible price advances in various asset types. We’ve seen these excess phase rallies in Cryptos, various stock symbols, Lumber, Copper, and other commodity prices recently. Currently, Natural Gas, Uranium, and a host of others are experiencing these types of Excess Phase “Blow-Off” peaks.

The transition into a new Depreciation Price Cycle will likely prompt the US Dollar to weaken below $87~88 eventually, prompting a very strong rally in Precious Metals. But before that happens, the “Blow-Off” peaks must complete and burst. We need to see some type of anti-climax event that changes trader/investor sentiment and restores more normal price relationships to assets. We may be experiencing that right now – the end of the “Blow-Off” euphoric price cycle phase as the next few charts will attempt to illustrate.

NYSE New Highs Collapse As US/Global Markets Rollover

This Weekly chart of the NYSE New Highs clearly illustrates the incredible rally after the March/April 2020 COVID collapse and the extreme new highs that were generated after the November 2020 US elections. In an incredible display of exuberance and euphoria, the NYSE New Highs level reached a massive 531 level on May 10, 2021. Since that time, the NYSE New Highs level has continued to consolidate below the 200 level and has recently moved below 100 as global equities continue to show weakness across the board.

I believe part of this cycle is related to the transition to the new Depreciation Price Cycle and another part of this is related to the Excess Phase “Blow-Off” peaking we’ve seen in price trends recently. Fundamentally, the markets must ramp up in activity and leverage for these excess phase processes to take place, and they must scale back and deleverage as these processes unwind. I still believe the US Federal Reserve will support the US markets and credit cycles throughout this transition, but as traders and investors move towards scaling back and unwinding leveraged trading positions near these peaks, we may see some aspects of overvalued market assets continue to contract over time.

https://www.thetechnicaltraders.com/wp-content/uploads/2021/09/article-1.png

S&P 500 Stocks Above 150 DMA Is About To Break Below 50 – Possibly Moving

Into Bearish Trending

This Weekly chart of the S&P 500 stocks above the 150 DMA shows quite a bit of history (originating near the start of 2018). Over this time frame, we can highlight two extended downtrends in price: the first happened in August/September 2018, and the second was the COVID-19 virus event. Every major downward price cycle over the past 3 to 4+ years has seen a decline below the 50 levels as the impulse downside price trend. Then, if the trends continue lower, we usually see a move below 20~30 and many weeks of extended downward trending before support is found by the markets.

Since COVID, the US Federal Reserve, and the US Government have enacted a number of support measures to take the pressures off consumers, banks, and many retailers and corporations.

Now that these support systems are ending and the US/Global economy must transition back to more normal aspects of economic function, we may see a moderate sideways/downward price contraction in the US/Global markets if this level breaks below 40~50. Remember, we are not suggesting an all-out bearish market collapse at this phase of the market trend, but we are suggesting that traders/investors need to be aware that this current trend is not the “endless bull market trend” many are used to seeing since the COVID lows (March 2020). That trend ended in April/May 2021 and it looks like we may be in for a bit of a wild ride over the next 12+ months.

https://www.thetechnicaltraders.com/wp-content/uploads/2021/09/article-2-1024x753.png

Still, at this point, we don’t have any real technical confirmation that the US market trends have broken into any new Bearish price trends. The transition from the Appreciation cycle to the new Depreciation cycle does not guarantee or suggest the US stock market will enter a big bearish price trend. What it does suggest is that volatility will increase while the US Dollar trends below $87 to $88 (eventually) and that Precious Metals will start to move dramatically higher. We are at the early stages of what appears to be the end of the “Blow-Off” rally phase that is complicated by the end of COVID policy, changes in US Fed plans, resumption of more normal economic functions, and an excessive credit/debt rally phase which is contracting.

All of this suggests the markets are about to become very volatile and big trends are going to roil through the global markets as a revaluation process takes place. This will present incredible opportunities for traders and investors who are capable of profiting from these huge trends and price rotations. It could also be very dangerous for those who continue to chase the rally trends with extended leverage.

In Part II of this research article, I’ll explore even more data and charts that support my conclusions and better illustrate what we should expect from the markets over the next 12 to 24+ months.

Please take a minute to learn about my BAN Trader Pro newsletter service and how it can help you identify and trade better sector setups.  My team and I have built this strategy to help us identify the strongest and best trade setups in any market sector.  Every day, we deliver these setups to our subscribers along with the BAN Trader Pro system trades.  You owe it to yourself to see how simple it is to trade 30% to 40% of the time to generate incredible results.

As something entirely new, check out my initiative URLYstart to learn more about the youth entrepreneurship program I am developing. This is an online program of gamified entrepreneurship designed to introduce and inspire youth to start their own businesses. Click-by-click, each student will be guided from their initial idea, through the startup process all the way to their first sale and beyond. Along the way, our students will learn life lessons such as communication, perseverance, goal setting, teamwork, and more. My team and I are passionate about this project and want to reach as many people as possible!

For a look at all of today’s economic events, check out our economic calendar.

Have a great day!

Chris Vermeulen
Chief Market Strategist

 

Will Quadruple Witch Send Stock Prices Lower?

The broad stock market index lost 0.16% on Thursday as it fluctuated within a short-term consolidation following last week’s declines. On September 2 the index reached a new record high of 4,545.85. Since then it has lost over 110 points. This morning stocks are expected to open virtually flat again following a pre-session rebound from overnight lows.

The index remains elevated after the recent run-up, so we may see more profound profit-taking action at some point.

The nearest important support level of the broad stock market index is now at 4,435-4,450 and the next support level is at 4,400-4,410. On the other hand, the nearest important resistance level is now at 4,490-4,500, marked by the previous support level. The S&P 500 bounced off its over four-month-long upward trend line, as we can see on the daily chart (chart by courtesy of http://stockcharts.com):

S&P 500’s Medium-Term Downward Reversal?

The S&P 500 index broke below its medium-term upward trend line a few weeks ago. However, it is still relatively close to the record high. The nearest important support level is at 4,300, as we can see on the weekly chart:

Dow Jones Trades Within a Consolidation

Let’s take a look at the Dow Jones Industrial Average chart. The blue-chip index broke below a potential two-month-long rising wedge downward reversal pattern recently. It remained relatively weaker in August – September, as it didn’t reach a new record high like the S&P 500 and the Nasdaq. The support level is now at around 34,500 and the near resistance level is at 35,000, marked by the recent support level, as we can see on the daily chart:

Apple at Support Level

Apple stock weighs around 6.3% in the S&P 500 index, so it is important for the whole broad stock market picture. Last week it reached a new record high of $157.26. And since then it has been declining. So it looked like a bull trap trading action. On Friday the stock accelerated its downtrend following an unfavorable federal judge’s ruling. We can still see negative technical divergences between the price and indicators and a potential topping pattern. The stock is at an over two-month-long upward trend line – it’s a ‘make or break’ situation.

Conclusion

The S&P 500 index continued to trade within a short-term consolidation yesterday. It’s been a week since the market reached the current price levels. So is this a flat correction within a downtrend or some bottoming pattern? Today we will most likely see another flat opening of the trading session – later in the day we may see some more volatility because of a quarterly derivatives expiration known as ‘quadruple witching Friday’.

The market seems overbought, and we may see some more profound downward correction soon. Therefore, we think that the short position is justified from the risk/reward perspective.

Here’s the breakdown:

  • The market retraced more of its recent advances this week, as the S&P 500 index extended its decline below 4,450 level.
  • Our speculative short position is still justified from the risk/reward perspective.
  • We are expecting a 5% or bigger correction from the record high.

Like what you’ve read? Subscribe for our daily newsletter today, and you’ll get 7 days of FREE access to our premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!

Thank you.

Paul Rejczak,
Stock Trading Strategist
Sunshine Profits: Effective Investments through Diligence and Care

* * * * *

The information above represents analyses and opinions of Paul Rejczak & Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. At the time of writing, we base our opinions and analyses on facts and data sourced from respective essays and their authors. Although formed on top of careful research and reputably accurate sources, Paul Rejczak and his associates cannot guarantee the reported data’s accuracy and thoroughness. The opinions published above neither recommend nor offer any securities transaction. Mr. Rejczak is not a Registered Securities Advisor. By reading his reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Paul Rejczak, Sunshine Profits’ employees, affiliates as well as their family members may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

S&P Ends Modestly Lower as Rising Treasury Yields Offset Robust Retail Data

The three major indexes spent much of the day in negative territory as rising U.S. Treasury yields pressured market-leading tech stocks, and the rising dollar weighed on exporters.

Amazon.com Inc, buoyed by solid online sales in the Commerce Department’s report, helped push the Nasdaq into positive territory.

“Looking at today, clearly we had positive news from retail sales and it looks as if the massive slowdown in the economy is not materializing as a lot of people expected,” said Ryan Detrick, senior market strategist at LPL Financial in Charlotte, North Carolina.

“It’s a nice reminder that the economy is still taking two steps forward for each step back even amid the COVID concerns,” Detrick added.

Economically sensitive transports and microchips were among the outperformers.

Data released before the opening bell showed an unexpected bump in retail sales as shoppers weathered Hurricane Ida and the COVID Delta variant, evidence of resilience in the consumer, who contributes about 70% to U.S. economic growth.

“Once again, it shows the U.S. consumer continues to spend and continues to help this economy grow,” Detrick said.

The Dow Jones Industrial Average fell 63.07 points, or 0.18%, to 34,751.32; the S&P 500 lost 6.95 points, or 0.16%, at 4,473.75; and the Nasdaq Composite added 20.40 points, or 0.13%, at 15,181.92.

Eight of the 11 major sectors in the S&P 500 ended lower, with materials suffering the largest percentage drop.

The consumer discretionary spending sector posted the biggest gain, with Amazon.com doing the heavy lifting.

Apparel company Gap Inc gained 1.6%. Online marketplace Etsy Inc and luxury accessory company Tapestry Inc rose 3.1% and 1.9%, respectively.

Ford Motor Co rose 1.4% after it announced plans to boost production of its F-150 electric pickup model.

Declining issues outnumbered advancing ones on the NYSE by a 1.27-to-1 ratio; on Nasdaq, a 1.06-to-1 ratio favored advancers.

The S&P 500 posted nine new 52-week highs and one new low; the Nasdaq Composite recorded 82 new highs and 94 new lows.

Volume on U.S. exchanges was 9.37 billion shares, compared with the 9.44 billion average over the last 20 trading days.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Stephen Culp; Additional reporting by Ambar Warrick in Bengaluru; Editing by Richard Chang)

World Shares Slide on Wall Street Sell-Off, China Worries

International investors that have been piling into China in recent years are now bracing for one of its great falls as the troubles of over-indebted property giant China Evergrande come to a head.

The developer’s woes have been snowballing since May. Dwindling resources set against 2 trillion yuan ($305 billion) of liabilities have wiped nearly 80% off its stock and bond prices, and an $80 million bond coupon payment now looms next week.

Hong Kong’s Hang Seng index dropped to its lowest level so far this year.

A report from the U.S. Commerce Department showed retail sales unexpectedly rose in August, indicating America’s economic recovery is strengthening on positive trends in consumer spending. The strong data lifted the dollar and pushed up treasury yields, and sent safe-haven gold down nearly 3%.

However, the U.S. labor market remains under pressure, with initial jobless claims rising by slightly more than expected last week.

Losses on Wall Street were dominated by technology and energy stocks as oil retreated from recent highs now that the threat to U.S. Gulf production from Hurricane Nicholas has receded.

The MSCI world equity index was last down by 0.29%, off an all-time high on Sept. 7. MSCI’s broadest index of Asia-Pacific shares outside Japan closed down 0.87%.

European equities bucked the trend, and Europe’s STOXX 600 closed up 0.44%.

The Dow Jones Industrial Average fell 91.51 points, or 0.26%, to 34,722.88, the S&P 500 lost 11.6 points, or 0.26%, to 4,469.1 and the Nasdaq Composite dropped 15.52 points, or 0.1%, to 15,146.01.

“(Retail spending) categories that were strongest in August were in Covid-beneficiary categories,” wrote Ellen Zentner, chief U.S. economist at Morgan Stanley.

“Now incorporating today’s retail sales release, we lift our real (personal consumer expenditures) tracking to +1.9% and GDP to +5.0%.”

Markets remain focused on next week’s Federal Reserve meeting for clues as to when the U.S. central bank will start to taper stimulus, especially after the flurry of U.S. economic data out this week.

On Tuesday, data from the U.S. Labor Department showed inflation cooling and having possibly peaked, but inflation in Britain was the highest in years, according to data on Wednesday.

“We have an unusual situation where the overall market is sideways to lower but with a  risk-on trend underneath and that’s down to signs the Delta variant may be peaking in the U.S., which is driving people into reflation and recovery plays,” said Kiran Ganesh, head of cross assets at UBS Global Wealth Management.

U.S. crude recently fell 1.2% to $71.74 per barrel and Brent was at $74.69, down 1.02% on the day.

The dollar index rose 0.506%, with the euro down 0.51% to $1.1755.

Spot gold slid 2.1% to $1,755.75 per ounce, after hitting an over one-month low of $1,744.30. U.S. gold futures settled down 2.1% at $1,756.70.

Caught in gold’s slipstream, silver was last down 4.3% at $22.79.

The U.S. 10-year Treasury yield was 1.3327%, while core euro zone government bond yields were little changed.

(Reporting by Elizabeth Dilts Marshall; editing by David Evans and Steve Orlofsky)

Wall Street Gains as Crude Price Surge, Strong Economic Data Prompt Broad Rally

All three major U.S. stock indexes gathered strength as the session progressed, with economically sensitive cyclicals, smallcaps and transportation stocks leading the charge.

While value stocks initially held the advantage, the risk-on sentiment gained momentum through the afternoon, broadening to include growth stocks.

“Today is the first time in a while when both growth and value stocks are doing pretty well. It’s been either or for much of the last few weeks and today it’s both,” said Chuck Carlson, chief executive of Horizon Investment Services in Hammond, Indiana. “Breadth matters, and that’s something investors like to see.”

A host of economic data showed hints of waning inflation and an ongoing return to economic normalcy, even as supply constraints, complicated by hurricane Ida, hindered factory output.

Import prices posted their first monthly decline since October 2020, in the latest sign that the wave of price spikes has crested, further supporting the Federal Reserve’s position that current inflationary pressures are transitory.

Next week, the Federal Open Markets Committee’s two-day monetary policy meeting will be closely parsed for signals as to when the central bank will begin to taper its asset purchases.

The graphic below shows major indicators against the Fed’s average annual 2% inflation target.

The Dow Jones Industrial Average rose 236.82 points, or 0.68%, to 34,814.39; the S&P 500 gained 37.65 points, or 0.85%, at 4,480.7; and the Nasdaq Composite added 123.77 points, or 0.82%, at 15,161.53.

Among the 11 major sectors in the S&P 500, all but utilities gained ground. Energy was by far the biggest gainer, benefiting from a jump in crude prices driven by a drawdown in U.S. stocks.

U.S.-listed Chinese stocks extended recent losses, as weak retail sales data pointed to a possible economic slowdown in the mainland, while Beijing’s regulatory overhaul of Macau’s casino industry further dampened appetite for Chinese stocks.

This follows a series of regulatory moves by China against major technology firms, which has wiped out billions in market value this year.

“It would be tough to buy any Chinese stocks,” Carlson said. “From an investor standpoint you don’t know what sector is next.”

“I don’t think the situation is going to get better any time soon and it’s probably going to spread,” he added.

U.S.-based casino operators Las Vegas Sands Corp, Wynn Resorts Ltd and MGM Resorts International slid between 1.7% and 6.3%.

Apple Inc snapped a decline over recent sessions following an adverse court ruling on its business practices, and a lukewarm response to its event on Tuesday where it unveiled updates to its iPhone and other gadgets. Its shares gained 0.6%.

Lending platform GreenSky Inc shot up 53.2% after Goldman Sachs Group Inc said it would buy the company in an all-stock deal valued at $2.24 billion.

Advancing issues outnumbered declining ones on the NYSE by a 2.15-to-1 ratio; on Nasdaq, a 1.70-to-1 ratio favored advancers.

The S&P 500 posted seven new 52-week highs and three new lows; the Nasdaq Composite recorded 55 new highs and 106 new lows.

(Reporting by Stephen Culp; additional reporting by Ambar Warrick and Sruthi Shankar in Bengaluru; Editing by Richard Chang)

Global Shares Rise on Strong U.S. Equities, Factory Data

U.S. factory production data showed that manufacturing remained strong despite a slowdown due to factory closures related to Hurricane Ida and the ongoing microchip shortage.

Also out of the U.S. import prices declined for the first time in 10 months in August. That followed Tuesday data from the U.S. Labor Department showing that inflation cooled last month and may have peaked.

The MSCI All Country World Index 0.21%. The S&P 500 rose from more than a three-week low and the Dow Jones index recovered from a near two-month trough hit on Tuesday.

“The Delta wave is likely receding in the U.S. and globally, and the pandemic recovery should restart,” JPMorgan Securities analyst Marko Kolanovic wrote, referring to the highly infectious coronavirus delta variant.

The Dow Jones Industrial Average rose 230.55 points, or 0.67%, to 34,808.12, the S&P 500 gained 33.31 points, or 0.75%, to 4,476.36 and the Nasdaq Composite added 94.48 points, or 0.63%, to 15,132.24.

The pan-European STOXX 600 index was down 0.80% after data showed that inflation in the U.K. hit a more than nine-year high last month. Economists believe it was largely due to a one-off boost that analysts said was likely to be temporary.

All eyes now are on next week’s U.S. Federal Open Market Committee’s monetary policy meeting. Expectations that the Fed will announce plans to taper its bond-buying program were lower after Tuesday’s softer-than-expected U.S. inflation data, especially as some expect inflation to remain high for months.

Possible increases to the U.S. corporate tax rate remain important in the background, and one bank estimated that raising the corporate tax to 25% could shave 5% off S&P500 earnings in 2022.

“We still have a very fragile market, especially if we get some type of tapering from the Federal Reserve,” said David Wagner, portfolio manager at Aptus Capital Advisors. “Any material change to tax policy can create a more volatile market.”

Data out of China showed that factory and retail output and sales growth hit one-year lows in August, as fresh COVID-19 outbreaks and supply disruptions pointed to a possible economic slowdown in the mainland.

The dollar was last down 0.122% mainly due to a sharp slide USD/JPY’s, which broke below important supports as safe-haven buying bolstered the yen in particular.

The yield on the U.S. government 10-year note was 1.3107%.

U.S. crude settled up 3.1% at $72.61 a barrel, and Brent ended 2.5% higher at $75.46 a barrel.

Spot gold dropped 0.8% to $1,790.56 an ounce. U.S. gold futures fell 0.68% to $1,792.40 an ounce.

(Reporting by Elizabeth Dilts Marshall in New York, Huw Jones in London; Editing by Will Dunham and Marguerita Choy)

S&P 500: Striking Similarity to the September Last Year

The broad stock market index fell to the daily low of 4,435.46 on Tuesday and it was the lowest since August 20. On September 2 the index reached a new record high of 4,545.85. Since then it has lost over 110 points. This morning stocks are expected to open virtually flat.

The index remains elevated after the recent run-up, so we may see some more profound profit-taking action at some point.

The nearest important support level of the broad stock market index is at 4,435 and the next support level is at 4,400-4,410. On the other hand, the nearest important resistance level is now at 4,465-4.475, marked by the recent support level. The S&P 500 got back close to its over four-month-long upward trend line, as we can see on the daily chart (chart by courtesy of http://stockcharts.com):

Dow Jones – Short-term Consolidation

Let’s take a look at the Dow Jones Industrial Average chart. The blue-chip index broke below a potential two-month-long rising wedge downward reversal pattern last week. It remained relatively weaker, as it didn’t reach a new record high like the S&P 500 and the Nasdaq. The support level is now at around 34,500 and the near resistance level is at 34,750, marked by the recent support level, as we can see on the daily chart:

September Last Year – S&P 500 Fell Almost 11%

In 2020, the S&P 500 index reached a local high of 3,588.11 on September 2 and in just three weeks it fell 10.6% to local low of 3,209.45 on September 24. This year, September’s downward correction has started at the new record high of 4,545.85 on September 3, so there is a striking similarity between those two trading actions. However, the index is just 2.4% down this time.

Apple Stock at Trend Line

Apple stock weighs around 6.3% in the S&P 500 index, so it is important for the whole broad stock market picture. Last week it reached a new record high of $157.26. Since then it has been declining. So it looks like a bull trap trading action. On Friday the stock accelerated its downtrend following an unfavorable federal judge’s ruling. We can still see negative technical divergences between the price and indicators and a potential topping pattern. The two-month-long upward trend line remains at around $147.

Conclusion

Yesterday, the S&P 500 index extended its short-term downtrend following breaking below 4,500 level on Friday. For now, it still looks like a correction within an uptrend. Today we will most likely see a flat opening of the trading session – we may see some more short-term consolidation.

The market seems overbought, and we may see some more profound downward correction soon. Therefore, we think that the short position is justified from the risk/reward perspective.

Here’s the breakdown:

  • The market retraced more of its recent advances this week, as the S&P 500 index extended its decline below 4,450 level.
  • Our speculative short position is still justified from the risk/reward perspective.
  • We are expecting a 5% or bigger correction from the record high.

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Thank you.

For a look at all of today’s economic events, check out our economic calendar.

Paul Rejczak,
Stock Trading Strategist
Sunshine Profits: Effective Investments through Diligence and Care

* * * * *

The information above represents analyses and opinions of Paul Rejczak & Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. At the time of writing, we base our opinions and analyses on facts and data sourced from respective essays and their authors. Although formed on top of careful research and reputably accurate sources, Paul Rejczak and his associates cannot guarantee the reported data’s accuracy and thoroughness. The opinions published above neither recommend nor offer any securities transaction. Mr. Rejczak is not a Registered Securities Advisor. By reading his reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Paul Rejczak, Sunshine Profits’ employees, affiliates as well as their family members may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

US Stock Index Futures Cautiously Higher as September Correction Looms

The major U.S. stock futures contracts are moving higher during the premarket session on Wednesday, clawing back some of the previous session’s losses. Although the “technical bounce” in the market is a welcome sight following the current downdraft, investors are still facing potential headwinds in the form of worries about the state of the economic recovery and the next policy move by the Federal Reserve.

At 08:54 GMT, the benchmark December E-mini S&P 500 Index futures are trading 4445.75, up 11.00 or +0.25%. The blue chip December E-mini Dow Jones Industrial Average is at 34529, up 65 or +0.19% and the tech-heavy December E-mini NASDAQ-100 Index is trading 15426.25, up 46.50 or +0.30%.

Are Stocks Entering a Correction Phase?

According to CNBC, “The Dow, S&P and the small-cap Russell 2000 have now traded in the red for six of the last seven days. Tuesday marked the fifth straight day of losses for the NASDAQ. September has historically been a down month for the markets, which have seen an average decline of 0.56% in the month since 1945, according to CFRA. And after eight months of straight gains, strategists say a major pullback could be imminent.”

Professional Investors Eyeing the S&P’s 50-Day Moving Average

The S&P 500 has continued to move higher throughout the year, dipping below the 50-day moving average only once, according to Fundstrat. Mike Wilson, chief investment officer at Morgan Stanley, told CNBC’s “Fast Money” that could be just the beginning.

“The midcycle transition always ends with a correction in the index,” he said of the S&P 500. “Maybe it’ll be this week, maybe a month from now. I don’t think we’ll get done with this year, however, with the 50-day moving average holding up throughout the year because that’s the pattern we typically see in this part of the recovery phase.”

Early Thoughts on Next Week’s Federal Reserve Monetary Policy Decision

Tuesday’s soft U.S. consumer inflation report has turned investor attention back to the Fed’s September 21-22 monetary policy decision. Earlier in the week, investors were betting the central bank would reveal its timeline for the start of tapering on the back of a robust U.S. producer price index report. After Tuesday’s U.S. consumer inflation report (CPI) showed a flattening of the data, however, investors are now uncertain about the timing of the Fed’s tapering of asset purchases.

“The Federal Reserve will probably delay slowing its purchase of Treasury and mortgage-backed securities despite slight indications that the price increase in durable goods is transitory, as illustrated by the reduction in used car prices,” said Dawit Kebede, senior economist at Credit Union National Association. “This is because we are far from maximum employment,” one of the Fed’s two goals of its dual mandate.

For a look at all of today’s economic events, check out our economic calendar.