JP Morgan's technical strategist Jason Hunter keeps the S&P 500 on a short leash that extends about 2.5% lower to 7500. The index remains in a bull market, but Wall Street is looking to earnings season and the midterm elections to turn the market around.
JPMorgan's Jason Hunter keeps the S&P 500 on a short leash that extends about 2.5% lower to 7500, a break of which would lose the market the benefit of the doubt. CNBC's Mike Santoli writes that Wall Street is looking to earnings season and the passage of the midterm elections to reset the market.
A bull market with mixed signals
Santoli says this remains a bull market, with pullbacks limited to 3% for half a year. Still, the index is now chopping around a flattish 50-day moving average at levels first reached 11 weeks ago.
Meanwhile, the AI-hardware cohort has badly broken stride, and bank stocks are trading poorly off their results. Late last week's selling in semiconductors and data-center equities resembled the forced unwinding of July, when a big upstart tech hedge fund was being all but liquidated.
Mike Wilson of Morgan Stanley and Aditya Bhave of Bank of America disagree on the Fed. Bhave says the markets are testing the Fed's pain threshold with the Nasdaq retreating 5%, and he maintains his non-consensus prediction for an October rate hike, while conceding it is a close call.
Earnings could set the next move
Historically, the fourth quarter after a midterm election year is overwhelmingly positive, and earnings growth is projected to exceed 20% year-over-year this quarter. But 2018 showed the risk: the S&P 500 fell 19% peak-to-trough in the fourth quarter of that midterm year, even as total earnings grew by more than 20%.
John Kolovos of Macro Risk Advisors sees a similar level to JPMorgan's as the breaking point. He says bullish sentiment is finally starting to wash out, and that a break below the mid-September lows near 7,500 would warn that something more than a routine pullback is unfolding.
Ned Davis Research's Pat Tschosik adds that if Big Tech disappoints on Q3 earnings, a full market washout may follow.
Source: CNBC
Trading involves risk.
Risk Disclaimer
