Pre-Market Outlook – 9/21/2021

Sometimes the crowd makes me want to laugh. The headlines yesterday told us that a correction might finally be starting in the stock market. And, of course, the China real estate market is going to crash the global economy.

My question is, where have these jokers been for three weeks? The market started the correction the day after Labor Day. The decline is closer to ending, not starting. It is quite probable that the market is already attempting a rally out of the 80-day cycle low. Of course, I will wait for confirmation from the algorithm, but we are much closer to a rally attempt than further declines, at least for now. The measured move has been made and completed at yesterday’s low.

The first task will be to close above the 5-day line. We tested the line overnight. So a move above the line at 4396 (basically the roundie at 4400) is bullish. Sellers were unable to gain traction at all last night, turning higher at the 21-week line, well above yesterday’s low. That line, often providing support in an 80-day cycle markdown, sits at 4341 or so. Yesterday’s low sits at 4293.75.

A retest of yesterday’s low is always possible, but it would be wise to stay bullish as long as the market holds the overnight low at 4341. The Fed meeting starts today, and we will have an announcement tomorrow. Do you really think the Fed will begin tapering in light of the China situation and the stock market’s woes? Would or could they have tapered anyway? I think not.

My best guess is that the market holds in the overnight range and launches a new rally tomorrow. There is work ahead to be sure in retaking all of our important lines, but I will not join the bearish crowd quite yet. They are always a day late and a dollar short. We went to cash early this month and will look to deploy it. By the way, Energy is holding up well in the correction so far.

A.F. Thornton