Improving. October is the last month of the “Worst Six Months” for DJIA and S&P 500 and the last month of NASDAQ’s “Worst Four Months”. In election years, October ranks dead last, but excluding October 2008, ranking improves to mid-pack. Our Official MACD Seasonal Buy Signal can trigger anytime on or after October 1.
Still Elevated. According to Investor’s Intelligence Advisors Sentiment survey Bullish advisors have slipped back to 51.5%. Correction advisors stand at 29.1% while Bearish advisors stand at 19.4%. Compared to the late August Bullish advisors peak of 61.5%, bullish sentiment has retreated, but it has not pulled back enough to give an “all clear” signal for new buying.
Stalled. Even though Atlanta Fed GDPNow model is estimating Q3 growth to be a massive 32%, weekly jobless claims and the number of people collecting unemployment benefits remains stubbornly high. Weekly claims continue to hover just under 1 million while over 26 million are still receiving benefits from all programs available. During the comparable period one-year ago, just under 1.5 million were receiving benefits from all programs. This is a significant gap that needs to close for the economy to truly recover. Without improvement, market gains are likely to be restrained.
Correcting? DJIA, S&P 500 and NASDAQ have all retreated back below their respective 50-day moving averages. Thus far, respective 200-day moving averages have held, but could be tested soon. With some rounding S&P 500 (down 9.6% as of Sept 23, close) and NASDAQ (11.8%) have both met the 10% decline to satisfy the common definition of a correction. DJIA has not with its 8.0% peak to recent closing low decline.
0 – 0.25%. Low rates are here again, and the Fed has committed to keep them low as long as needed and even longer to ensure its inflation objective is satisfied. The Fed is “all in” with its support for the economy and the market. From the post-financial crisis time of ZIRP (zero interest rate policy), market pullbacks and corrections are likely to be limited and shallow when they occur as there are historic levels of liquidity available and few places for it to go outside of equity markets.