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 post-election years October ranks mid-pack with average performance ranging from 0.9% (DJIA) to 1.4% (NASDAQ). Keep an eye out for the Official MACD Seasonal Buy Signal. It can trigger anytime on or after October 1.
Decelerating. According to the Atlanta Fed’s GDPNow Forecast, Q3 growth is projected to be 3.7% as of its update on September 21, down from 5.7% in its August 25 projection. August’s jobs report was also a major disappointment with only 235k net jobs added versus expectations around three times higher. However, these are still respectable growth and jobs numbers when compared with pre-Covid data.
Consolidating. At the closing lows of the late-September pullback, DJIA, S&P 500 and NASDAQ were all below their respective 50-day moving averages. DJIA had been meandering since mid-August while S&P 500 and NASDAQ moved modestly higher into early September before all retreated. The pullback has reset Stochastic, relative strength and MACD indicators. The recent rebound has been confirmed by a Stochastic crossover, but not by MACD.
0 – 0.25%. As widely anticipated the Fed left interest rates unchanged and continued preparing the market for an eventual tapering of its asset purchase program (QE). Inflation hawks that were expecting action at this meeting were left disappointed and the “all clear” flag for stock buying continues to fly at least until the next Fed meeting. In post-meeting comments Fed Chairman Powell said the committee is ready to move and suggested that tapering could be completed by mid-2022. More Fed members are also projecting a rate hike in 2022.
Correction. According to Investor’s Intelligence Advisors Sentiment survey Bullish advisors have slipped down to 47.1%, their lowest number since May 2020. Correction advisors stand at 30.6% while Bearish advisors have crept up to 22.3%. Overall sentiment has slipped to neutral. Based solely upon sentiment it is neither a great time to be selling or a great time to be buying.