Bearish. September is the worst performing month of the year for DJIA, S&P 500, NASDAQ (since 1950), Russell 1000 and Russell 2000 (since 1979). In midterm years going back to 1950, average losses widen for DJIA (–1.0%), NASDAQ (–0.8%), Russell 1000 (–1.1%) and Russell 2000 (–0.6%). S&P 500’s average September loss improves slightly from –0.5% to –0.4% in midterm years.
Resolute. Turkey, Chinese growth, tariffs, etc. are not derailing the market or traders and investors. According to Investor’s Intelligence Advisors Sentiment survey bulls are at 57.3%. Correction advisors are modestly lower at 24.3% and Bearish advisors are just 18.4%. The difference between bulls and bears remains at a cautious level that leaves room for further gains, but it also does not completely rule the possibility of a rough patch.
Firm. U.S. unemployment ticked back to 3.9% earlier this month. Atlanta Fed GDPNow model is currently forecasting Q3 growth of 4.3%. This follows a 4.1% reading for Q2 which was the best pace of growth in nearly four years. Biggest headwinds to growth are the Fed, additional tariffs and a stronger U.S. dollar. Thus far their impact has been limited.
Divergent. Major indexes have been marching to their own beat since dropping in late-January/early-February. DJIA is furthest from its last all-time closing high reached in January. S&P 500 is in second place, closer to its old high, but also dating back to January. The Russell 2000 had its run that ran out of gas in June. NASDAQ was recently at new all-time highs in July, but has struggled since. Advance/Decline lines for NASDAQ and Russell 2000 peaked in early July. S&P 500 and NYSE continued to climb into early August. Any attempt at new all-time highs by a single index is likely to be short-lived until participation broadens.
1.75-2.00%. The Fed’s next meeting will end on September 26 and the current probability of a rate increase at this meeting is 96.0% according to CME Group’s FedWatch Tool as of August 30. At some point the combination of higher rates and a shrinking Fed balance sheet will begin to effect growth and the market. What level is open to debate.