The Dow was off only 50 points. Some would say that seasonal factors, such as summer vacations and the Jewish holidays, which came early this year, have contributed to volatility in prices.
Now the market is about to enter a seasonally favorable period that should last until about five days into January. The authorities will be highly motivated to engineer a year-end rally, and the first five days in January should benefit from redeployment of funds as the year turns.
An important test will be whether any year-end rally is sufficient to break what bears contend is a new pattern that calls for any rallies to be considered selling opportunities.
If they are right, once the fourth quarter is over, the bear trend should resume. Whether the year-end rally occurs and what its effect will be on the technical condition of the market will be a theme of the fall season.
With the market still feeling aftershocks from the scandal in which Volkswagen is accused of using a software fix to cheat on emissions tests, Phillippe Houchois,
Auto Analyst at UBS, says regulators were complicit in the violations: “There are all kinds of ways in which you can improve your performance on the test. Everyone knows about it; it’s been going on for years.”
He thinks the regulators are working “to give credibility to the process.”
For this writer it sounds a lot like financial regulation.
of Bank of America Wealth Management, offers a bullish outlook for the market this fall. He disagrees with the thesis that a “massive paradigm shift” is taking place. Kelly Evans asked whether earnings reports will show top-line growth shrinking, but Hyzy pointed to consumer benefits from falling commodity prices that will enable more consumer spending. He asserts that the market is setting up for “a much better October, November than we’ve seen.”
On a contrary note, Mandy Drury spoke with Todd Gordon, of tradinganalysis.com, and Larry McDonald,
of Societe Generale, about what looks like a rollover of the consumer discretionary sector. Gordon sees a broad technical downtrend that he thinks will continue, and he plans “to focus on the short side.” McDonald agrees and thinks that weakness over the next couple of months will provide opportunities to get back into this group.
tells Martin Soong that investors continue to believe that the Fed intends to raise rates, but he thinks that when they figure out this is just a show, gold will dramatically reverse.
of U.S. Bank Private Client Reserve, sees uncertainty regarding monetary policy growing as the Fed opens a “Pandora’s Box” by expanding its outlook to the global economy. He said markets wonder, “Why do we still need these crisis-level rates? Is there something out there you know that we don’t?” He also sees the fall as “a seasonally stronger period.”
Another seasonal factor is the end of the fiscal year and the prospect of a government shutdown, but Sam Chandan,
of Chandan Economics, counts on the GOP Leadership to avoid this.
VP at JD Power, warns that the VW scandal will affect the brand and car values.
Carter Braxton Worth,
of Cornerstone Macro, has identified another troubled German giant beside VW – Deutsche Bank (DB). He predicts that the current test of 2011 lows will be resolved to the downside, and he concludes “something’s wrong” that isn’t good for US banks or equities.
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