Title: The Market Rebound: A True Recovery or a Momentary Bounce Ahead of a Financial Sector Correction?
Fullhapce Intelligence employs artificial intelligence and physics-based models to analyze market trends for swing traders, providing comprehensive reports and analysis on a daily, weekly, and monthly basis. Investors should be aware that our sector analysis may experience rapid changes due to the dynamic nature of swing trading, with 'short-term' referring to a period of several days in this context. Investors need to recognize that what is presented in this video and a long-term value investing strategy are of a very different nature. Fullhapce Intelligence disclaims responsibility for the results of any investments made.
This commentary was originally made on Thursday, October 17 at 2:55 a.m. Eastern Time, and the video that accompanies this commentary is available via the link in the video description.
If you'd like a quick review of the market outlook first, please take a look at slide 6.
Good morning, Wall Street swing traders!
The markets closed on a steady but positive note, largely driven by corporate earnings releases.
Our previous forecast was that the market would rise until it reached around 5850, and that's exactly what happened, but it was a slower rise than expected.
The market moved slowly throughout the day, which generally looked good for the health of the market.
Interestingly, the market continued to hesitate during the intraday session, showing a quiet move, like the calm before the storm.
Did the market recover yesterday's losses and resume its rally? Or is today just a temporary bounce that's been fueled by volatility?
Let's take a look at what's ahead with FullHorse's daily market forecast for swing traders.
Let's take a look at the daily movement of the market indices.
All four major indices are up.
The Vix Index is down over 5%, but Vix Index futures are barely moving, which is unusual.
SPX: 5842.47, 0.47% up.
Dow Jones: 43077.7, 0.79% up.
NASDAQ: 18367.08, 0.28% up.
Russel 2000: 2304.8, 1.64% up.
Vix index: 19.58, -5.14% down.
VIX Futures: 27.52, -1.71% down.
Now let's take a look at the daily sector performance.
Most sectors were up.
However, communications and consumer staples were flat.
Across sectors, financials, airlines, REITs, some technology sectors, capital goods, utilities, transportation, autos, consumer discretionary, and housing were up.
Some technology sectors and consumer staples/retail were down.
What happened?
The main driver was strong earnings reports from large US banks.
This was fueled by positive economic forecasts from management highlighting resilient growth and weakening inflationary pressures.
Other non-bank companies also reported good results.
However, the technology stocks market underperformed due to a combination of fundamental, technical, and math factors.
Let's take a look at a few things to consider.
Inflation in the U.K. fell short of consensus expectations, raising the possibility of further quantitative easing by the Bank of England.
Central banks in the Philippines and Thailand cut interest rates.
Banks continued to report solid earnings in the third quarter.
Corporations reported favorable earnings and outlooks.
Here is a daily market forecast for swing traders by Fullhapce.
The weekly market potential is still bullish, but volatility remains as high as it was yesterday.
The daily market, on the other hand, is still neutral and uncertain, making it difficult to predict where the market will head.
Tomorrow morning, the markets may have a shaky start.
The market indices had strong gains early and late in the day, but were mostly stagnant for the rest of the day. While there weren't any big drops, the pace of the market was slow and boring, with the SPX opening around 5810 and closing around 5845.
Investors still seem to be holding on to the confidence they gained yesterday, but not making any bold moves.
They seem to be waiting to see where the wind will blow next, with a number of economic data releases including PMIs on Thursday and the September jobs report on Friday, which could affect investor sentiment.
Our calculations suggest that a downward correction of more than 1.2% is imminent for the financial sector.
The tech sector is still uncertain, and bond prices are still bullish.
On the other hand, China is bearish, but there may be good news on the horizon, and oil prices may have reached the end of their decline.
Despite this mixed bag of indicators, we expect the market indices to trade between 5820 and 5860 on Thursday, October 17, and then close around 5850 after a rather calm day.
Then, if the employment data released on Friday comes out positive, the market could see a strong uptrend.
Let's consider some additional perspectives.
Macro factors provide upside momentum for equities despite rich valuations and geopolitical challenges.
Following the election, there are concerns about fiscal policy-related risks as decisions on 2025 taxes and spending loom.
The optimism associated with a possible Trump victory appears to be losing steam as concerns about tariffs and economic populism rise.
There is also an opposite scenario.
The counter scenario is that tomorrow's PMIs come out negative and the market could fall below 5795.
Other evidence for the contrarian scenario includes the following
Some banks' last quarterly volume numbers didn't look very strong.
Several consumer goods companies warn that 2025 will be a “transition year” due to macro headwinds.
Earnings season in Europe has started off disappointingly poorly.
The geopolitical environment continues to be fraught with risk.
Given the current uncertainty and our mixed indicators, we believe a contrarian scenario is plausible.
For traders who are sympathetic to this contrarian scenario, it could present an opportunity to buy low when market indices are at their lowest.
Here is the conclusion.
We see the weekly market as bullish, while the daily market is neutral with no clear direction.
Despite being wary of a correction in the financial sector and the tech sector still looking vulnerable, we believe that tomorrow's market will close slightly higher after a boring move as investors await Friday's employment report.
Traders who are in sync with our forecasts may want to stay hopeful, wait for Friday's employment report, and place minimal trades.
Traders may also be wise to consider both the main forecast and the counterfactual scenarios to efficiently handle risk.
Thanks for watching.
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