I was thinking about the market and what is potentially behind this stupid rally, and at heart, this seems like nothing more than an oversold bounce, given a lot of bond market dislocation last week. Bonds have started to settle down.
Today we will get the , and estimates are for a reading of 56. The is also expected to show 200,000 new jobs in September. But the most important data will be the on Friday, with jobs expected to rise by 263,000 and an of 3.7%.
So this data is going to have an impact one way or another. My thinking is that rates are closer to their lows at this point.
Looking at the , there are many reasons to think this rally ends around 3,800 or goes higher to around 3,950. At this point, I can’t come up with enough to feel the rally extends to 3,950. Additionally, if it went all the way to 3,950, my five wave count lower would be invalidated. So, I am sticking with my view for an S&P 500 to head lower to 3,500.
At this point, the rally has been a 38.5% retracement of wave three down.
At this point, I’m more willing to bet that the 10-year yield doesn’t have too much further fall. This would mean equity values are too high, and if the ERP rises, it will be due to stock prices tumbling.