US 500 - the month ahead

For the month ahead, the major focus will remain on the Fed. Breadth indicators suggest the US 500 has dropped to levels that have historically proved to be attractive entry levels – will this time be different?

On pure hope alone, the market could rally sharply, perhaps even back towards the 4,300 summer highs. But to push higher from that, we suspect that more concrete evidence needs to emerge that inflation has peaked. Also, the Fed would need to ease its verbal interventions and start to indicate more of a pause in Q1 2023.

Without such steps, the consensus remains that any buying momentum that materialises may be yet another bear market rally. Even more downside risks mean if the five percent gains in the US 500 posted in October already fails quickly it will make a serious dent to buying interest and threaten further lows.

This leaves a nervous and volatile few weeks ahead. Hope and technical indicators suggest a rapid recovery is possible, albeit with concerns over how sustainable any such moves can be.