The S&P 500 ($INX) consolidated during September before closing at 7,651.54, down 34.60 (0.45%) for the month. Theoretical Positions: Investors likely bought back into the Index durning April and are watching for a topping pattern due to expectations for additional interest rate hikes (see below).
The Dow Jones Industrial Average ($DOWI) posted a solid selloff during September, closing on its monthly low of 50,906.05, down 2,279.85 (4.29%) for the month. Theoretical Positions: Investors are likely long blue chip stocks. However, this could be the long-term topping pattern due to expectations for additional interest rate hikes.
The Nasdaq ($NASX) still looks to be in a major downtrend. The Nasdaq completed a bearish spike reversal during June. The move to a new high of 27,288.79 during September could be considered a Wave B (second wave) of the 3-wave downtrend pattern. The Nasdaq was spiked toward the end of the month by the meeting between the US president and his Chinese counterpart. Theoretical Positions: Investors might’ve sold some of their holdings near the June settlement of 26,213.72 based on the completion of a bearish spike reversal pattern.
The US 10-year T-note (ZN): The 10-year T-note extended its major downtrend to a low of 104-04 during September, its lowest price since June 2007. This tells us longer-term interest rates are expected to go up. Theoretical Positions: Investors may have gone short the 10-year near the March close of 111-015 based on that month’s bearish outside range.
The Fed Fund Futures Forward Curve: After the US Federal Open Market Committee raised the Fed fund rate by 25-basis points in September, the forward curve stabilized. As the month came to an end the October contract was priced at 96.1125, equating to an expected rate of 3.8875%, within the new range between 3.75% and 4.0% (futures prices of 96.25 and 96.0). November finished September at 96.035 with December down at 95.885. This indicates the next 25-basis point rate hike could come at the conclusion of the December meeting.
