The market managed to dial again any doubt about its bigger-picture rally following the small setback from a pair weeks in the past. Final week the S&P 500 superior almost 1.1%, making one other file excessive within the course of. The NASDAQ Composite, in the meantime, was up slightly greater than 1.3%, additionally touching a brand new all-time excessive. No actual surprises there. As we famous in final week’s Weekly Market Outlook, even unhealthy weeks had been bullish in some methods, leaving the bullish undertow intact.
Nonetheless, there’s no denying the acquire appears to be dropping steam. Breadth is weakening, and technically, so is momentum.
Possibly it’s only a short-term headwind; there’s actually some resistance instantly above for among the indexes. Regardless, the general development continues to be bullish just because each indexes stay above all of their transferring common traces and above most of their straight-line assist ranges.
We’ll present what this seems like in a second. Let’s first have a look at the small quantity of financial information that was really posted final week.
Financial Knowledge Evaluation
Sure, the federal government shutdown is delaying the discharge of financial knowledge from its companies. The massive one we didn’t get final week was Friday’s jobs report from the Division of Labor. We’ll share these numbers as soon as we get them. Within the meantime we nonetheless heard a number of key stories from non-government organizations…
…like Normal & Poor’s Case-Shiller Index of house costs on Tuesday (though we did hear the FHFA’s measure of house costs as nicely that day). Each items of knowledge had been from July, so it’s a bit dated already. In each circumstances although, we’re seeing weak spot agency up.
Dwelling Worth Index Charts
Supply: FHFA, Nationwide Assn. of Realtors, TradeStation
It’s unsurprising although, provided that we’re additionally seeing subpar begins and permits in addition to tepid actual property gross sales transactions stay tepid (save final month’s shock surge in new house gross sales, which isn’t apt to final).
We additionally bought the one-and-only studying on client confidence from the Convention Board on Tuesday, rounding out the College of Michigan’s third and closing sentiment rating for September reported final week. In each circumstances they fell from August’s ranges, extending bigger-picture downtrends. Customers are clearly tiring of fixed tariff worries, and extra not too long ago, a weakening jobs market.
Shopper Sentiment Charts
Supply: Convention Board, College of Michigan, TradeStation
Simply keep in mind that this weak confidence will finally be interpreted as a contrarian bullish sign. We’re simply not fairly there but… in all probability.
The one different numbers we heard final week was the Institute of Provide Administration’s measures of companies in addition to manufacturing exercise. Manufacturing edged slightly larger, however stays under 50. Companies, in the meantime, it nonetheless above 50, however the knowledge is in a transparent downtrend that ought to drag the index under 50 quickly sufficient.
ISM Service, Manufacturing Index Charts
Supply: Convention Board, College of Michigan, TradeStation
Every little thing else is on the grid.
Financial Knowledge Report Calendar
Supply: Briefing.com, TradeStation
This week was already going to be a bit mild when it comes to financial stories. So long as the federal government shutdown persists powerful, it’s going to be even lighter. The one factor of curiosity that will likely be posted regardless is Wednesday’s launch of final month’s FOMC assembly’s minutes. Pay attention for any refined adjustments to the language, though it’s unlikely we’ll hear something opposite to the Fed’s plans to chop rates of interest just a few extra occasions into subsequent 12 months.
That being mentioned, ought to the shutdown finish, we’ll doubtless hear September’s jobs report shortly thereafter. Simply maintain your ears open and your eyes peeled.
Inventory Market Index Evaluation
Maybe the most effective factor concerning the rally that’s been underway since April is that it’s by no means been allowed to go unchecked or uninterrupted for lengthy sufficient to stumble right into a setback that might evolve into one thing extra. That’s what the each day chart of the S&P 500 under tells us anyway. It’s not rallied greater than about seven days at a time with out some type of measurable dip… simply sufficient to maintain the advance from overheating, permitting it to final so long as it has. Discover that the index hasn’t been under the straight-line assist (purple, dashed) that’s been in place since Might; the yellow arrows mark each key occasion the place that line served as a flooring.
S&P 500 Each day Chart, with Quantity and VIX 
Supply: TradeNavigator
Now take a step again and have a look at the larger image, through a weekly chart of the S&P 500. From this vantage level we are able to see the slightly-jagged however generally-steady uptrend from April’s low. It’s by no means actually “gone parabolic.” Somewhat, it’s simply chugged alongside at a sustainable tempo. Additionally discover that the index simply inched its method again into the slim buying and selling vary that first fashioned again in 2023 (framed by dashed traces). There’s way more room for it to maintain transferring larger earlier than bumping into both of the higher boundaries (blue, and purple).
S&P 500 Weekly Chart, with MACD and VIX 
Supply: TradeNavigator
There are a few barely regarding element to focus on on the weekly chart although. The primary of those is, though it’s not straightforward to see with the chart of the S&P 500 itself, the MACD traces do counsel that the rally is dropping steam. And the second? It looks like the Volatility Index (or VIX) is beginning to kind a bowl form and curve its method again into an uptrend. If that is so, finally it can weigh on inventory costs. The query is, how a lot and the way lengthy will it weigh on them?
The NASDAQ Composite’s each day chart seems fairly comparable, however with one noteworthy exception. That’s, quite than straight-line assist, the composite is capped by straight-line resistance (yellow, dashed). That being mentioned, the NASDAQ can also be fairly nicely supported too.
NASDAQ Composite Each day Chart, with Quantity and VXN
Supply: TradeNavigator
A extra critical ceiling is in play on the weekly chart… the one which extends all the best way again to 2023 (purple, dashed). And, you can too see the NASDAQ’s momentum is fading whereas at approaches this long-term resistance line. The composite’s volatility index (VXN) appears to be attempting to inch its method upward once more as nicely, just like the S&P 500’s VIX. This units the stage for bearishness, however as was the case with the S&P 500, the development right here continues to be bullish. There’s additionally loads of technical assist under, any and all of which might forestall a small selloff from changing into an even bigger one.
NASDAQ Composite Weekly Chart, with MACD and VXN
Supply: TradeNavigator
This can be a frustratingly uncommon state of affairs. The market is overdue for a real correction. However, the bulls simply aren’t letting it occur. They may in the end although, and certain prior to later. Nonetheless, it’s been harmful to foretell a pullback that requires you to battle the tape. Let’s assume this bullish momentum goes to stay in place till it’s crystal clear that we are able to’t. That can take the failure of a number of technical flooring, and a transparent upward thrust from each of the volatility indexes. The exhausting half is ready, not understanding when that’s lastly going to occur, or when and the place it would finish.
We’ll discuss extra about that when it really issues. Simply don’t dig in too deep within the meantime.