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The market had a little pop going into September. Stocks have given up just a little of that ground, but the consensus seems to be that equities are once again on solid ground.
We have the “Wizard of Wharton, retired finance professor Jeremy Siegel, saying a bright earnings outlook and no more rate hikes until at least December should both be good news for stocks.
And earlier this week, Goldman Sachs released a special note saying the chance of a U.S. recession in the next year had dropped to only 15%. Many other Wall Street firms, as well as the economists at Bank of America (BAC), seem to agree.
On the other hand, September is historically the worst month for traders, with a number of stocks showing bearish seasonal patterns.
How do you determine your market outlook when you have two seemingly distinct sets of facts? How do you know whether you should be short or long the markets this month?
I'll show you exactly how I do it...
Here's What's Going On in the "Four Corners" of the Market
Stocks, bonds, futures, and currencies - they all forecast where the market is and where it's going. That forecast becomes even clearer when you see them all together. And, if you're able to take a broad look at all of that, you can unlock the opportunities the stock market is offering each wee
That's why I'm always checking in on these asset groups - what I like to call the "Four Corners". They're my favorite tool to track (and even predict) the markets. Altogether, they give you a nice overview of what's coming, and how to prepare for it.
And here's what they're saying...
U.S. Equities:
Last week, we saw two important technical signs on SPDR S&P 500 ETF Trust (SPY).
First, we saw SPY hold above the $435 pivot low that I highlighted in my previous "Four Corners" commentary. In that article, I wrote...
"That's because there's another pivot low at $435 (circled in yellow with the green arrow pointing to it), and it's also acting as support... For now, the line in the sand for SPY is that pivot low around $435. As long as SPY trades up or even sideways from here but does not breach or take out that pivot low on a closing basis, I will continue to lean bullish in my market sentiment."
As you can see in the year-to-date chart above, SPY has continued to trade higher than that level. As long as the ETF continues to stay above $435, the path of least resistance should be to the upside.
But that's not the only bullish sign I'm seeing...
Last week, we also saw SPY cross above its 50-day moving average, which I've included in light blue on the YTD chart above.
Now, the moving average is one of the most important indicators that many - if not all - technical analysts use to identify overall …
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About the Author
Tom Gentile, options trading specialist for Money Map Press, is widely known as America's No. 1 Pattern Trader thanks to his nearly 30 years of experience spotting lucrative patterns in options trading. Tom has taught over 300,000 traders his option trading secrets in a variety of settings, including seminars and workshops. He's also a bestselling author of eight books and training courses.