Conclusion
Last week, the market hit new record highs for the S&P 500, but sentiment weakened slightly on Friday, and this morning the index is expected to open lower. The question remains: Will the uptrend continue despite overbought conditions? While no clear negative signals have appeared, the rally seems overstretched.
On September 18, I noted about the coming FOMC release “A “buy the rumor, sell the news” scenario seems likely, but a bullish breakout to new highs can’t be ruled out either.” The previous Thursday’s rally invalidated a quick reversal scenario, but the market could still be forming a top before a more significant correction.
I opened a speculative short position in the S&P 500 futures contract on September 16.
In my Stock Price Forecast for September 2024, I noted that, “the market experienced significant volatility in August, with a roller-coaster ride that included a sell-off to the August 5 local low and a subsequent advance, leading to a consolidation near the record high. (…) sharp reversal suggests more volatility in September. In August, I wrote that ‘August is beginning on a very bearish note, but the market may find a local bottom at some point.’ The same could be said today, and September will likely not be entirely bearish for stocks.”
For now, my short-term outlook remains bearish.
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