Last week, we further consolidated in the Triangle. Bears did win the week, but statistically both sides still have equal chances. We currently think bears have a slightly better chance. The first bearish target will be right around the September low. This week, bears really need to break below 214 because that should trigger anther round of selling.
Since nothing has changed much in the short term, the medium term is mostly the same.
Outflows have begun to slow a bit as the threat of an immediate hike has passed. (Also, on a long term view, not hiking now begins to increase chances of inflation down the line). It is clear the market wants Hillary to win due to the status quo factor. A Trump win which is less likely will be seen just similar to the Brexit vote by the market.
Also, we are entering another blackout period. This cuts off one of the mains sources of buying for the market. In 2016 this has not mattered as much as in the past due to the large inflow from Europe. However, since these inflows have weakened, the blackout could have a larger effect this time around.
Bulls may be using the buy the pullback card we have been mentioning over the last few weeks. However, we think a big move is imminent once again. The market is now coiling and we could see about a 8-10 point move in the next month or so. We currently think there are better chances that the move may be to the downside. We will look for a possible swing short if the opportunity presents itself.
Long-Term Market Outlook (Updated 9/5/16).
With the holiday Monday, we will likely see lower volumes early in the week.
Trend Following Models:
My long term models are Bullish.
My medium term models are Leaning Bearish.
My short term models are Neutral.