US 500

While the market appears bullish right now, the S&P 500 forecast is far from certain, especially with a lack of fresh bullish catalysts to consider. Could profit-taking negatively impact the market soon?

So far, US stock investors appear unfazed by global softness in commodities and bond markets, even as the 10-year Treasury yield inches closer to 4.5%, reflecting a more hawkish interest rate outlook for next year. But with the dust settling on Trump’s election victory, could we finally see retracement to cause a bearish shift in the short-term S&P 500 forecast?

A brutal day for risk sent Wall Street indices lower on Thursday, but support levels and the tendency for stocks to rise on the week of a US election could help the S&P 500 and ASX 200. Assuming the wheels don't truly fall off first.

US equities have fallen at the start of today’s US session, following on the losses from the previous day and weaker global markets. The tech sector is in the spotlight following underwhelming earnings reports from Meta and Microsoft, with the latter falling in excess of 5% shortly after the open.

The USD resumed its place at the top of the FX table ahead of a key US inflation report, which has USD/JPY bulls on the cusp of reclaiming the 150 handle. The S&P 500 reached a record high and the Dow Jones is within striking distance of following suit.

Our S&P 500 analysis suggests a correction is long overdue, but we need to see a reversal pattern first before we try to call any sort of a make top. But heading to Q4, there are plenty of risks to consider, including the market being too optimistic with the Fed’s rate cuts and on company earnings results.

It has been another risk-on day in the markets so far in this first half of Thursday’s session, especially for China where stocks have stormed higher amid all the stimulus efforts by the government. As we approach the end of September, the major US indices are now near overbought levels ahead of Q3 earnings and the US elections.

The US stock market has shown impressive resilience following the recent volatility. Investors, thrilled by the Federal Reserve’s outsized rate cut, have pushed index futures higher. However, there are mixed opinions about what lies ahead. For now, it looks the S&P 500 will open at a fresh record high.

The robust rally in the first half of the year set high expectations, particularly in the technology sector. While some sector rotation into energy and financials occurred last week, it wasn't sufficient to prevent a broader market decline. Disappointing earnings from key players like Alphabet and Tesla have led to revised investor expectations.

Another turbulent session on Wall Street saw the Dow Jones snap a 6-day winning streak, the VIX rise to a 12-week high and drag ASX 200 futures down accordingly.

While the tech sector's struggles have dominated headlines, it's crucial to note that the broader stock market's performance is not solely dependent on the "magnificent 7" group of tech stocks. The Dow Jones Industrial Average reached its fourth consecutive record high on Wednesday, driven by sector rotation. The small-cap Russell 2000 index has also posted substantial gains lately, spurred by last week's inflation report showing consumer prices falling to 3.0% year-over-year in June.

Supporting stocks today was news of another weaker-than-expected inflation report. Treasury yields fell as a slowdown in producer prices measure of inflation bolstered the case for the Federal Reserve to cut rates this year.

It is the second week in a row that open interest on VIX futures notched up a volatile swing, according to the latest COT report. If the VIX can remain low, perhaps we'll see the S&P 500 reach new highs, unless US economic data deteriorates too quickly and rings recessionary bells.

I suspect we're seeing the early moves of a pullback of appetite for risk in general, which saw traders push Wall Street indices and gold lower on Wednesday thanks to weak treasury demand. And it seems to be paving the way for the next leg higher for the USD.

With a lack of any fresh bullish stimulus and following months of solid gains, we could see a bit of a correction. So, in my opinion, the S&P 500 outlook is not looking too great at current levels and without a sizeable correction.

We have four full trading days left in the month, and odds favour another bullish month for US indices. However, price action on the daily timeframe has alerted me to a potential pullback, while VIX futures and market positioning are also sending smoke signals to be aware of.

The record highs created for gold and Wall Street this week appear to have been bad omens, with sharp bearish reversals forming and rate-cut bets being slashed.