Improving. October is the last month of the “Worst Months” for DJIA, S&P 500 and NASDAQ. However, in pre-election years since 1951, October is the second worst month of the year.
Frothy. According to Investor’s Intelligence Advisors Sentiment survey, bulls are at 55.1%. Correction advisors are now at 28.1% and Bearish advisors are just 16.8%. The improvement in sentiment has tracked the market’s rebound and is now near levels where caution should be considered. Bulls were only slightly higher at the end of July just before the market retreated.
Soft. Q2 U.S. GDP came in at 2% and the Atlanta Fed GDPNow model is currently forecasting 1.9% growth in the third quarter. This confirms growth is slowing. Trade tensions remain creating further uncertainty among businesses. Employment metrics remain reasonably solid which is supporting consumer confidence.
Testing Support? September’s rally did push DJIA, S&P 500 and NASDAQ back above their respective 50-day moving averages but failed to produce new highs. NASDAQ has already slipped back below its 50-day moving average while DJIA and S&P 500 are just holding above theirs. NASDAQ could be headed toward a test of its August lows. DJIA and S&P 500 could follow if they break their respective 50-day moving averages.
1.75-2.00%. Just as expected the Fed cut rates by 0.25% at its September meeting. Barring a significant degradation in economic data, the Fed could be done with cuts in 2019. According to the CME Groups FedWatch Tool there is just a 47% chance of a cut in October and a 67.4% cut in December which is far from certain in either month.