![\"10-year](\"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2014\/2014-09-30-yields.png?resize=525%2C315&ssl=1\" "\\"10-year")
<\/p>\nWe are now at the September quarter-end, normally a volatile time for stocks. Expect selling pressure to increase over the next few weeks as investment managers sell off poor-performing stocks. Increased cash balances then enable them to take advantage of new opportunities as they present themselves. If the fundamental under-pinning of the market is sound, the market is likely to undergo a minor dip before resuming its advance. If not, and there are serious flaws, the sell-off could turn into a rout — as in 1987 and 2007.<\/p>\n
At present the market appears sound, with none of our market indicators flagging elevated risk, and the bull market is likely to continue.<\/p>\n
Bears cite the potential for an increase in US interest rates as a major threat to the US economy. The track record for the last 15 years suggests otherwise. The graph below compares percentage change in 10-year Treasury yields to the Wilshire 5000 Total Market Index (divided by 20 for purposes of comparison). The two tend to rise and fall in sync, with a 20% to 40% rise in the index accompanying a 1% increase in yields.<\/p>\n
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The Fed tends to be conservative about raising interest rates (“doves” outnumber “hawks”) and is unlikely to raise rates until there is solid evidence of a recovery. So a rise in interest rates is more likely to be followed by a surge in stocks than a fall.<\/p>\n
The S&P 500 found significant support at 1965, the lower border of the broadening wedge. Monday’s long tail flags (short-term) buying pressure. Follow-through above 1990 would suggest a rally to test the upper border. Breach of 1965, however would indicate another correction. Decline of 21-day Twiggs Money Flow below zero would confirm, while recovery above its September high would suggest that buyers are back in control.<\/p>\n
![\"S&P](\"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2014\/2014-09-30-spx.png?resize=525%2C363&ssl=1\" "\\"S&P")
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* Target calculation: 2000 + ( 2000 – 1900 ) = 2100<\/p>\n
CBOE Volatility Index (VIX) is rising, but the low level continues to suggest a bull market.<\/p>\n
![\"VIX](\"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2014\/2014-09-30-vix.png?resize=525%2C363&ssl=1\" "\\"VIX")
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Dow Jones Industrial Average found support at 16950 on the weekly chart. Long tails again flag buying pressure. Recovery above 17150 would suggest another advance, while follow-through above 17350 would confirm. Breach of support at 16950 is unlikely, but would warn of a correction. 13-Week Twiggs Money Flow reflects some hesitancy, but the long-term picture is bullish.<\/p>\n
![\"Dow](\"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2014\/2014-09-30-dow.png?resize=525%2C363&ssl=1\" "\\"Dow")
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* Target calculation: 16500 + ( 16500 – 15500 ) = 17500<\/p>\n","protected":false},"excerpt":{"rendered":"
We are now at the September quarter-end, normally a volatile time for stocks. Expect selling pressure to increase over the next few weeks as investment managers sell off poor-performing stocks. Increased cash balances then enable them to take advantage of new opportunities as they present themselves. If the fundamental under-pinning of the market is sound, … <\/p>\n