Stock market volatility remains the theme as indexes are little changed from where they started the week with not much NEW news or data to help guide direction. Bulls seem to be comfortable ahead of the U.S. Federal Reserve’s upcoming policy meeting next week on Tuesday and Wednesday, September 21-22.

Although the US Federal Reserve has signaled that it will start to taper asset purchases sometime this year, there is still a lot of debate about the timing. With the August Employment Report showing a big slowdown in U.S. job growth, some think the Fed might wait a bit longer before adjusting policy.

Bears vs bulls

Most Wall Street analysts think the central bank will wait until its November meeting to announce details for reducing its asset purchases, which most still anticipate will begin in December. St. Louis Fed President James Bullard recently stressed that, regardless of the disappointing August report, the Fed should start tapering soon.

Bullard as well as most bulls view the slowdown in job growth in August as being temporary, largely driven by the impact of the coronavirus Delta variant on consumer-facing industries that scaled back hiring. As such, the slowdown in job growth and other economic activity should only be temporary.

While job growth may be weak, other economic data still paints a picture of a healthy, ongoing recovery. The latest evidence is Retail Sales for August, which defied expectations with a gain of +0.7% as opposed to the decline most were forecasting and after a nearly -2% drop in July.

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Bulls take this as a positive sign that U.S. consumer demand has held up in spite of the summer coronavirus surge as well as increasing inflationary concerns. Keep in mind, a lot of Americans had summer plans complicated or ruined completely for a second year in a row and are now heading into the second holiday season under the cloud of Covid.

You have to imagine there is just a crazy amount of pent-up-demand piled on top of existing pent-up-demand at this point and bulls are still confident that it will translate to even stronger economic growth down the road.

What to watch?

Turning to next week, the housing market takes center stage with the NAHB Housing Market Index on Monday; Building Permits and Housing Starts on Tuesday; Existing Home Sales on Wednesday; and New Home Sales on Friday.

There are also some earnings of interest next week including Adobe, AutoZone, Cracker Barrel, and Stitch Fix on Tuesday; General Mills, Jefferies Financial, and KB Home on Wednesday; and Accenture, Costco, Darden Restaurants, and Nike on Thursday.


Technical analysis

SP500 rallied more than 100% from COVID low without a pullback. So, its not surprising we see increased volatility now. The price is testing daily MA50. It has offered support multiple times till now. So, bulls are hoping the price will build a base in coming sessions. The cycles forecast a rally later in October this year. With that in mind, its good to observe price action for some time before considering swing longs. If daily MA500 fails, we may see a long-waited pullback.

ES ##-## (Daily) 2021_09_20 (1_26_55 AM)

Valuations and Coming One-, Three-, Five-, Seven-, Nine-, and 11-year Returns.
First, let’s take a look at the valuation landscape via the following chart, courtesy of Ned Davis Research. The data, in some cases, goes back to the 1920s. NDR ranks each measure in terms of five quintiles that ranges from Extremely Undervalued (Green) to Extremely Overvalued (Red). As you can see, in looking at the most popular valuation metrics, it’s red across the board.

Valuations Factor 9 12 2021
9 12 2021 Vaulations GDP

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