SP500 Is On The Edge – What’s Next?

Stock market investors are feeling more optimistic now that a deal to temporarily extend the debt ceiling has officially been inked. The deal moves the debt ceiling deadline to December 3, which is also when the recently passed government funding bill runs out.

It’s likely that legislation to fund President Biden’s $4 trillion worth of infrastructure and other spending plans will be moving through Congress around the same time. Those bills are expected to include tax increases for businesses and on capital gains. All of that combined could set markets up for a rocky December but for now, investors are turning attention back to economic data and upcoming earnings.

What to watch next week?

Turning to next week, Q3 earnings “unofficially” kick off Wednesday with earnings from big Wall Street banks, including Bank of America, Goldman Sacks, JP Morgan Chase, and Wells Fargo. Other earnings worth noting next week include Fastenal on Tuesday; BlackRock, Delta, and The Progressive Corp. on Wednesday; Alcoa, Citigroup, Dominos Pizza, Morgan Stanley, United Health Group, U.S. Bancorp, and Walgreens on Thursday; and J.B. Hunt, PNC Financial, and Prologis on Friday.

In economic data next week, it’s a packed calendar that will cover all the economic bases from jobs to inflation. Highlights include the Job Openings and Labor Turnover Survey on Tuesday; the Consumer Price Index on Wednesday; the Producer Price Index on Thursday; and Retail Sales, Empire State Manufacturing, Import/Export Prices; Business Inventories, and the preliminary read on October Consumer Sentiment.

Technical analysis

As we expected SP500 bounced back up last week. The market is reaching a critical point – MA50 retest. There is strong accumulation in this market, while the price holds under daily MA50. In these mixed conditions, its better to stay on the sidelines till the market finds a new direction. If accumulation remains and the price starts building the base above daily MA50, the market will attempt to renew an uptrend. On the other hand, if futures lose accumulation and price gets rejected at MA50, SP500 might continue to drift to the downside. The cycles forecast bottom in October. But we need a price action confirmation.

Likely we will see increased volatility in the coming weeks as the market tries to stabilize and build a new trend. We will take advantage of the next move no matter to the downside or to the upside. Let the market find and confirm the new trend direction, and generate a signal when we should get involved, don’t just trade because you think it may move in a direction before it has proven itself.

Over the next 12+ months, I expect very large price swings in commodities and the US stock market.  I believe the markets are starting to transition away from the continued central bank support rally phase and may start a revaluation phase as global traders attempt to identify the next big trends.

Please take a minute to learn about my managed accounts service and how it can help you to take advantage of coming market rotations and make your money work for you.

SP500 Is On The Edge – What’s Next? by Inna Rosputnia

Wishing you a great week!