Market at a Glance 9/29/2015

By: Christopher Mistal

September 29, 2015

Psychological: Skittish. Volatility, measured by CBOE VIX index has remained above 20 since August 21. Major indices are negative year-to-date again. There are death crosses on DJIA, S&P 500, NASDAQ and Russell 2000 charts. Bullish sentiment has nearly evaporated and few seem willing to hold onto positions over the weekend. Overall sentiment is nearly bearish enough for the market to bottom; all it needs is a reason. Improving data, an acceleration of inflation or an improvement in growth and earnings forecasts could do it.

Fundamental: Mixed. Corporate earnings remain challenged by weak commodity prices and a strong U.S. dollar. Inflation and inflation expectations are running below desired levels. Global growth and forecasts are tepid. Yet Q2 U.S. GDP was revised higher to 3.9% and our unemployment rate is at 5.1%. If U.S. growth can hold up, year-over-year comparisons of corporate earnings should improve next year provided the dollar does not surge higher and commodity prices remain flat.

Technical: Correction. DJIA, S&P 500 and NASDAQ are trading just above their respective closing lows from August 25 which is keeping alive the possibility of a “W” or 1-2-3 bottom chart pattern. The lows will need to hold or only be briefly violated followed by a rally back above mid-September highs in order for the pattern to be fulfilled and the bottom confirmed. Stochastic, relative strength and MACD indicators are all negative and at or near oversold levels signaling a bounce could come soon.

Monetary: 0-0.25%. Citing inflation and international developments, the Fed did not move at its September meeting. October is unlikely; December is a slight maybe while data and markets appear to think it will be 2016 before any interest rate increase happens. ZIRP (zero interest rate policy) will be seven years old in December, a few more months could not possible cause any more harm (or good) than has already been done, but moving too early would certainly cause some pain.

Seasonal: 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”. Frightful history of market crashes aside, October has been improving in recent years, fourth best DJIA month with an average gain of 1.6%. It’s the third best S&P 500 month (+1.6%) and second best for NASDAQ (+2.3%). Keep an eye out for our Official MACD Seasonal Buy Signal. It can trigger anytime on or after October 1.