S&P-has the summer sell-off set the stage for further weakness?
With less than a week to go until the end of September and the beginning of the fourth quarter, it looks as if the stage is set for a painful decline for the rest of 2023.
The S&P is down around 4% so far this month, and has lost 6.5%, or 300 points, since it poked its head above 4,600 at the end of July. This high also marked the S&P's best level since March 2022.
It does feel as if the bullish momentum is waning, and this appears to be borne out by a quick glance at the standard MACD. Just looking at the chart, the area around 4,300 could offer mild support, having acted as resistance in early June, and more significantly, in August last year. We'll see.
If we don't get a significant break of support, it could be that the blood-letting over the last two months may be all we get. That pull-back may have taken sufficient froth off the top of the market for the bulls to step in once again, and look to challenge the record high just above 4,800 from January 2022.
The consensus view after last week's FOMC meeting is that we've got a 'hawkish' Federal Reserve, ready to hike rates further to stifle inflation. The accompanying surge in US Treasury yields should be enough to persuade stock market bulls to run for the hills.
Or should it?
With the FOMC's inflation and economic growth forecasts higher than they were in June, and with the Unemployment Rate still holding near historic lows, surely the Fed should have hiked last week rather than pausing? Perhaps they're not so hawkish after all. And those Treasury yields are looking quite attractive now.
Overall, the market is at a critical juncture. It's quite possible that the next few days could help settle market direction for the rest of the year.
The S&P is down around 4% so far this month, and has lost 6.5%, or 300 points, since it poked its head above 4,600 at the end of July. This high also marked the S&P's best level since March 2022.
It does feel as if the bullish momentum is waning, and this appears to be borne out by a quick glance at the standard MACD. Just looking at the chart, the area around 4,300 could offer mild support, having acted as resistance in early June, and more significantly, in August last year. We'll see.
If we don't get a significant break of support, it could be that the blood-letting over the last two months may be all we get. That pull-back may have taken sufficient froth off the top of the market for the bulls to step in once again, and look to challenge the record high just above 4,800 from January 2022.
The consensus view after last week's FOMC meeting is that we've got a 'hawkish' Federal Reserve, ready to hike rates further to stifle inflation. The accompanying surge in US Treasury yields should be enough to persuade stock market bulls to run for the hills.
Or should it?
With the FOMC's inflation and economic growth forecasts higher than they were in June, and with the Unemployment Rate still holding near historic lows, surely the Fed should have hiked last week rather than pausing? Perhaps they're not so hawkish after all. And those Treasury yields are looking quite attractive now.
Overall, the market is at a critical juncture. It's quite possible that the next few days could help settle market direction for the rest of the year.