9 Oct 2021, 16:11
In last week’s update, we mentioned that the stock market indexes have found support and there could be a rebound. On the Dow Jones Index chart in the picture, we could clearly see that the blue-chip index has found a support on 2 channel lines. This indicated that there could be a rebound for stocks this week after a bearish September. Afterall, stocks tend to find bottoms in October and start the year-end rally. Just as we anticipated, the stock market indexes made a rebound on Thursday after moving sideways for the earlier part of the week. We took the opportunity to enter a few counters.
The September correction could be due to uncertainty looming over the current debt ceiling crisis in the US Congress. If law makers could not agree on a deal, then the US government would not be able to raise the debt ceiling and fulfil its debt obligations. This has led to speculations of the Federal Reserve starting to taper the stimulus measures. Therefore, last week’s rebound could be attributed to Congress striking a deal to temporarily lift the ceiling and avert a crisis.
From a technical chart standpoint, the September correction occurred because stocks were getting too expensive and it was time for investors to take profits. At no time during the whole month, we felt that the stock market was in danger of a crash. Our proprietary researches have not indicated so. Therefore, we also exited some stocks to take profit and waited patiently for the stock market to find bottom again when we started buying.
Next week would be crucial as we wait and see if a new uptrend develops.
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