Market Briefing For Monday, Sept. 20
Proximity to trend penetration - is just how S&P finished the trading week; in a well-watched Quarterly Quadruple Expiration that was melodramatic as so many technicians and pundits were calling for cataclysmic declines.
They sure did 'not' get that; which is not to say after a little more jockeying in the new week, that it won't occur. I'll note that the Nasdaq is not showing the same proximity to the rising pattern; hence the implication of a projection for a collapse based on a 'diamond' pattern configuration, doesn't ensure that at all.
In fact, what you could get (since we projected the alternating declines for the mega-cap-led S&P this past week interspersed by rebounds and essentially in technical language that is the diamond pattern) is a 'breakdown fake-out' for a start; and then we'll have to gauge the veracity of an ensuing rebound effort.
It is important to view the behavior taking into context the varying Indexes that also have some of the mega-cap leadership; and not the Expiration behavior too. Expiration was smooth and not standing-out, except just a couple stocks which saw truly incredible volume in the final moments.
Meanwhile. . . politicians continue fiddling with Covid outside of their realm of knowledge (to be kind about it); bears will fret the Debt Ceiling issue (hardly a time to have things shut down so wouldn't overly worry about it now); and of course the 'inflation' issue has proven already enduring, and not transitory; so just as I've been saying (you don't give higher wages and just redact them). If anything the Government-forced mandates about the vaccine (which are only partially helpful) are causing people to quit jobs and confusing the economy.
We have a 'demand / supply' issue (too much demand, insufficient supply) at the present; and there is no formula for a quick end to it, given that Covid has been a reason and is again surging in parts of Asia where it was suppressed. This is a warning as several countries have thought it safe to reopen widely in the past and stunned more than once when they had to tighten things up.
The new week will be a crucial battle around the S&P and 'if we get a break to the downside' (more likely after a rebound following an initial try lower). The S&P can of course measure as low as 3800 in a cascading free-fall; but 4100 is more realistic. However, the true 'bear trap' would deny that, albeit with new shuffles, and primarily because so much of the market is not high like mega caps (and we have optimism about Oil and Industrial infrastructure stocks as well, such as steel and aluminum... not for speculation but helps Indexes).
Regardless we remain in a seasonally weakest, hence most dangerous, part of the year when anything out of the blue can impact markets. China for now hasn't had their junk bond collapse, but if they do, then that's a 'black swan', or at least potentially so. If they don't fold, fine; things may muddle along.
This is an excerpt from Gene Inger's Daily Briefing, which typically includes one or two videos as well as more charts and analyses. You can subscribe for more