Conclusions
- Stock indices are likely to bottom out in October, initially during the first week potentially. Rallies might encounter some resistance into Earnings and expiration by mid-October but any late month selloff is buyable for a push up into December of this year.
- Treasury Yields likely to peak out at/near when Stocks start to bottom, and a rolling over in Yields is an important technical catalyst given the correlation and should result in Stock indices bouncing. Pullbacks in Yields into next year looks likely
- US Dollar index getting stretched based on multiple metrics and has begun to show evidence of daily/weekly momentum wavering a bit on this latest surge. A rolling over in DXY also is a real possibility from October-December but should prove short-lived.
- Commodities should be close to bottoming out which likely should happen in October with Energy as well as Precious metals while DXY rolls over.
- Cryptocurrencies have largely mirrored Equities but many tokens have held up above June lows. Rallies are likely also in October given the current correlation with Equity markets.
Indicators
Reasons Why SPX should bottom in early October
- Cycle projections show US Equities bottoming by October 6th and a sharp rally into October expiration before minor pullback into late month. Markets likely rally into mid-December
- Breadth levels have gotten extremely contracted. Percentage of SPX now below their 20 and 50-day (m.a.) has reached 2-3%
- Treasury Yields along with the US Dollar are likely to peak out in October given a combination of DeMark exhaustion and cycles
- DeMark exhaustion looks to be very close to aligning on weekly charts across Equities, Treasuries, and FX. An October reversal likely
- Sector strength in Financials and in formerly beaten down Consumer Discretionary sub-sectors like Casinos and Cruise-liners is constructive- Most Casino and Re-Opening trade names have proven resilient of late
- Consumer Discretionary broke out of intermediate-term downtrends vs Consumer Staples
- Elliott-wave analysis shows this as an ongoing corrective move. Wave structure is close to producing exact time confluence. Bottom line, a three-wave bounce into December/January looks likely
- Sentiment polls have steadily deteriorated as bearish sentiment has grown more extreme. Equity Put/call ratio has nearly reached June levels, while AAII readings showed the 4th most negative reading ever