For those who missed it, you can view my Yahoo Finance appearance (09/10) HERE.
Short-term trends for US Equities remain negative and insufficient technical strength has occurred that give meaningful proof that a low is at hand. While the early week bounce has been somewhat encouraging, momentum remains negatively sloped in the short run, and trends in most sectors turned short-term bearish last week. While the stabilization in both US Dollar and Treasury yields might allow for a bounce that might also coincide with a bounce in US Equities, more is needed to suggest that lows are at hand. This week’s CPI data along with next week’s FOMC meeting arguably are important catalysts, and if data varies substantially vs. expectations, this might coincide with the start of a more meaningful rally into October. Overall, I do not expect meaningful weakness to break August lows in September. However, I also cannot say with much confidence that lows are officially in place.
Despite the minor bounce into the end of the day, Technology accounted for the majority of this recovery, while five sectors finished negative in Tuesday’s session. As discussed yesterday, September’s early month downturn needs to show more recovery sooner than later to suggest that lows might be in place ahead of the FOMC meeting.
Resistance-wise, getting above 5525 on a daily close would be encouraging for SPX.
Meanwhile, 5383 looks to be important support, and it’s hard to rule out a break of this level down to 5320-3 area which would be the last important support zone ahead of a challenge of August lows.
However, structurally, any pullback under this week’s lows likely would represent an above-average trading low, and I do not suspect SPX-5100 is breached, given the ongoing good levels of market breadth along with some sentiment polls having turned more negative.
As can be seen below, the near-term trend is negative, and more technical improvement is necessary before weighing in that SPX is turning back higher toward all-time highs. Overall though the broader trends remain in good shape. Thus, it’s hard to make much of this deterioration in recent weeks, despite the above-average drawdown in Technology. SPX’s daily chart is shown below which looks to be getting closer to support, but will need to turn up sharply higher sooner than later on above-average breadth to prevent further seasonal weakness.
S&P 500 Index
September’s first four days necessitate some rapid recovery if history is any guide
While I remain bullish on the market’s prospects between now and the end of the year, it remains difficult to say with a lot of conviction that lows are in for September, and a pushback to highs right away should occur.
Historical examples of when S&P experienced a difficult start to the month are shown below.
As can be seen below, when the first four trading days of September turn in a negative performance of greater than -2%, performance-wise, the average and median returns for the month tend to be much worse than September when better returns are seen.
This might make intuitive sense given the downward-sloping momentum that normally arises from a quick, sharp drawdown. However, it means that it will be necessary for SPX and QQQ to both show some stabilization and recovery quickly to avoid further technical damage from getting underway. The table below starts in 1928 and shows the instances where SPX has begun the month down -2% or worse.
S&P 500 first days of September and rest of the month
JPM looks compelling down near $200 and has not violated major support
JPM’s largest drop since 2020 provided a bit of a wake-up call to Bank investors, who might be wondering if their comments on net interest income expectations for 2025 being too high could lead the stock down even further.
Importantly, while some investors might suspect the relief on the regulatory front regarding capital hikes might be bullish (as this was widely expected) the warnings resulted in above-average losses for many bank issues.
Technically speaking, JPM looks to have serious support at $200 following a greater than 10% pullback in recent weeks.
As this daily chart from last October shows below, JPM -0.19% has continued to exhibit a stellar uptrend of higher highs and higher lows. While the recent selloff does seem to be a short-term concern, this directly followed a very sharp rally from $191 area to over $220 within a few weeks’ time.
Thus, until $190 is broken, it looks right to consider JPM attractive on weakness, technically following this recent pullback. Furthermore, the area near $200 should be supported given the lengthy uptrend line extending from last October’s lows.
I expect some stabilization by next week’s FOMC meeting, and expect JPM likely begins a bounce back higher to test its highs into October. If this fails to carry as high as $220+ and begins to turn back lower into November and breaks $200, such a development would warrant giving JPM a bit closer scrutiny as to the possibility of future technical weakness. At present, this pullback, albeit severe, has not resulted in any serious technical deterioration.
JPMorgan Chase
XLF charts show the Banks’ weakness constituting a technical “non-event”
Given that Financials have been the 3rd best performing sector (out of 11) on both a Cap-weighted and Equal-weighted basis over the last three months as well as Year-to-Date, this past week’s losses in Bank stocks don’t look too serious.
Just in the last few months alone, XLF along with equal-weighted Financials ETF by Invesco (RYF) have both pushed back to new all-time highs. Financials was one of five sectors that recorded new all-time high monthly closes on an Equal-weighted basis as of the end of August just two weeks ago.
Thus, some minor consolidation to this recent sharp advance doesn’t look too troubling, technically.
While XLF is comprised of heavy weightings in BRK-B/B V -0.23% , MA -0.22% which have helped the Financials sector show above-average strength (along with the Insurance stocks) as compared to either C 1.23% or BAC 0.68% , this doesn’t look to be a reason to Underweight this sector based on JPM’s warnings.
It’s right to technically overweight Financials until trends show proper evidence of giving way, both on an absolute and also, more importantly, a relative basis. That has not happened yet.
Weekly charts of XLF below show this minor consolidation to be a technical “Non-event” given ongoing uptrend still very much intact following its push to new all-time highs.
SPDR Select Sector Fund
