What a Mess
Markets are way-oversold by many measures. Typically this would suggest a move higher. However, we’re seeing a re-test of the June lows. A breach of this support level would be very negative from a technical perspective. And by very negative, we’re talking another 10-to-12 percent of downside decline for the SPX.
Futures are negative pre-market. Plus, the stats wonks remind us, the last week of September is often the worst trading week of the year.
All of this is to suggest there may be more pain ahead for investors. Sentiment has shifted very negative. Internationally, economists are reporting danger of recession and falling currency values. The 10-year treasury yield is the highest it’s been in over 14 years. And 30-year mortgage rates in the US are approaching (if not over) seven percent.
So… it’s messy.
It’s tough to find a silver lining right now. The Fed has affirmed it is going to kill inflation – whatever that takes. That means raising rates. Meanwhile, Washington DC seems committed to spending even more (which seems inflationary, go figure). So our own government can’t agree on how to tackle the challenge of massive inflation paired with a shrinking workforce.
Conundrums aside, there may be some opportunities for traders in the scrum that is volatility. The VIX has been creeping higher, confirming some over-sold conditions. It’s possible a brief relief rally is forming. The whisper-ish number floating around in the inter-web-thingy is around 3900 for the SPX.
Those numbers have some technical merit. The hope would be that today we see an intra-day low that holds above 3636.87. If we’re fortunate enough to see that, it could signal a ‘double bottom’ and give stocks a place to build from. Otherwise, the bear market is likely to continue. (And if sentiment is any indicator, the bear scenario seems likely. It’s tough to find an optimist anywhere in this market.)
Here’s the charts for the week:
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