Stock Market Outlook: Use Rallies To Reduce Risk

The Market Forecast indicator is showing bearish short-term sentiment following Wednesday’s extreme low on the momentum line and the possible bearish near-term high on the S&P 500 Index.

However, the Russell 2000 may be in the midst of another “catch-up” trade with its intermediate line turning higher and close to producing a strong bullish Market Forecast pattern.

RSI and CCI indicators are flirting with their respective midpoints as the S&P 500 continues to show bullish bounce signals on its Ichimoku Cloud.

Wednesday’s break below the 8-day and 17-day EMAs may prove to be short-lived with strong volume support below and the S&P 500 still above the value area of its one-year Volume Profile.

Volume picked up Wednesday with the Fed’s policy decision but today’s late short-term drop found intraday support and suggests this week’s bounce may continue into the end of the week.

Volatility remains high and suggests to stay cautious and remember to use rallies to reduce risk rather than load up on bullish trades to the point of being painfully one-sided when a “real” intermediate pullback begins.

Stock Market Outlook for September 16

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Asset class comparison charts are showing “risk on” patterns – even with today’s drop at the end of the day. Long-term bonds are poised for a significant drop and could be a major tailwind for risk appetite once we work through any election-relation intermediate weakness in equities.

Energy, Financials and Industrials – some of the smallest sectors in the S&P 500 – led the way higher in what could be the final “catch-up” trade for stocks before this 5-month long intermediate rally concludes after September expiration.

Twitter:  @davidsettle42  and  @Market_Scholars

Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.

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