With the end of the month and the end of the quarter behind us, we could see some money working after the Dow Jones sold -1,516.81 points in September, the highest number of points (no percentage) since the sale of -3,492.20 from March 2020 to the start of the coronavirus pandemic. Will traders buy the drop? The RBA and RBNZ are also meeting this week. Will either of them increase the rates? Plus, after kicking the box through December 3rd for a government shutdown, Congress now faces the impending debt ceiling and a vote on the infrastructure bill. Will the debt ceiling be lifted before October 18e? OPEC + meets on Monday against the backdrop of a potential energy crisis. Will they increase the supply? This week’s economic data will also bring non-farm wages to the United States and a change in employment in Canada!

Central banks

The Reserve Bank of Australia (RBA) and the Reserve Bank of New Zealand (RBNZ) are meeting this week. At the last RBA meeting, despite continued shutdowns of the Delta variant of the coronavirus, the RBA reduced as promised from A $ 5 billion per week to A $ 4 billion per week. However, given the economic effects of the recent virus crisis, they also said they expected growth to slow and unemployment to rise. Therefore, they will maintain bond purchases at the current rate until at least mid-February 2022.

On the other hand, RBNZ is expected to increase by 25bp at their meeting this week, becoming the second central bank in the developed world to hike rates (Norges Bank hiked rates last week) from 0.25% to 0.50%. New Zealand’s central bank was set to hike at its August meeting, but instant lockdowns from a coronavirus outbreak caused them to delay the hike until October. After the stronger-than-expected second-quarter GDP reading, some even speculated that the RBNZ could rise by 50bp, but central bank players quickly crushed that speculation.

American Politics

Last week, Congress averted a potential financial crisis by extending funding to the United States from September 30.e until early December. By kicking the box, it allows Congress to sort out other potential financial issues, such as raising the debt ceiling. Treasury Secretary Janet Yellen said she expects the United States to run out of money on October 18e. Although Senate Republican Minority Leader Mitch McConnell has told Democrats they will have to “go it alone” through the reconciliation process, Democrats are reluctant to do so. Their reasoning: the two parties have pushed up the spending bill. Democrats don’t want to be seen as solely responsible for raising the debt ceiling. It’s sure to be a villain, right down to the wired fight between Republicans and Democrats.

There is another ugly fight going on right now. However, these are internal fights between Democrats over President Biden’s $ 3.5 billion welfare program. Some Democrats want to vote for infrastructure, such as roads, bridges and tunnels. These senators are looking for a smaller package for social issues, like the one proposed by Senators Machin and Sinema, which is only worth $ 1.5 trillion. Republicans are completely united against both bills, so Democrats will have to agree to pass the package. There may be a vote this weekend.

Energy crisis?

The UK last week saw 20-car pump lines due to supply shortages and bottlenecks. The government said there was a lot of fuel in UK refineries. The problem is, they don’t have enough drivers to deliver fuel to gas stations. Recently, the government said it was seeing the first signs of declining demand. However, the Petrol Retailers Association said that although a number of gas stations are still dry, that number is lower than the 37% recorded on Tuesday last week. However, they did not see a drop in demand. The UK has issued short-term visas for truck drivers and has assisted the military to help deliver fuel.

But is this just the beginning? WTI crude oil rose more than 9.5% last week, to 76.67, while Brent crude rose by a similar amount, hitting a high of 80.06 last week. In China, there have been gradual blackouts, forcing factories to shut down or cut production. (This will further exacerbate the supply chain problems). Why? Increased demand for electricity, record coal prices and government price controls. In addition, Europe has been hit by high prices for natural gas and electricity. As the weather cools across Europe and the cooler states of the United States during the winter, prices are expected to climb even higher. Look this week and throughout the year to see if the markets may rule the price as the colder months approach in the Northern Hemisphere. OPEC meets on Monday. Will it be too soon for them to step up production or will they wait until they see more of the effects of the power crunch to determine if more oil is needed?

Economic data

The big economic events this week are the OPEC + meeting, the RBA meeting and the RBNZ meeting, but the big economic data of the week is the US nonfarm wages and the evolution of employment in the Canada Friday. While Fed Chairman Powell said, “We are all but here” in terms of meeting employment targets for the Fed, if the September impression is weak, will that change its? opinion? Powell noted that 750,000 has been the average over the past 3 months. It is expected that +500,000 additional jobs will be added in September. This impression will be closely scrutinized. Canada expects +65,000 after rising +90,200 in August. The other main economic highlights are as follows:

On Monday

  • OPEC + meeting
  • Canada: Building permit (AUG)
  • United States: factory orders (August)

Tuesday

  • Global Services PMI Final (SEP)
  • New Zealand: NZIER Business Confidence (Q3)
  • Japan: Tokyo CPI (SEP)
  • Australia: Trade balance (August)
  • Australia: NAB Business Confidence (SEP)
  • Australia: Retail Sales Final (AUG)
  • Australia: RBA decision on interest rates
  • EU: IPP (August)
  • Canada: Trade balance (August)
  • United States: Trade balance (August)
  • United States: ISM Non-Manufacturing PMI (SEP)
  • United States: IBD / TIPP Economic Optimism (OCT)

Wednesday

  • New Zealand: Decision on Interest Rates
  • Australis: RBA Card Pack
  • Germany: Factory orders (AUG)
  • EU: Construction PMI (SEP)
  • United Kingdom: Construction PMI (SEP)
  • EU: Retail sales (AUG)
  • United States: ADP Employment Change (SEP)
  • Stocks of crude

Thursday

  • Germany: Industrial production (AUG)
  • United Kingdom: Halifax House Price Index (SEP)
  • United States: job cuts at Challenger (SEP)
  • Canada: Ivey PMI (SEP)

Friday

  • Australia: final building permit (AUG)
  • Australia: RBA Financial Stability Review
  • China: Caixin Services PMI (SEP)
  • Germany: Trade balance (August)
  • Canada: Job Change (SEP)
  • United States: non-farm wages (SEP)

Chart of the week: quarterly SPX 500

Source: Tradingview: Pierre X

The summer months have been exciting for the third quarter of the S&P 500 Index. The Large Business Index opened in July at 4305.1 and traded up to 4551 over the summer. However, as September approached, traders began to focus on the events that brought the markets down. These included a potential reduction in bond purchases announced by the US Federal Reserve, negative China-US relations, slower growth and higher than expected inflation, the Evergrande saga and a possible crisis. energy imminent. The S&P 500 lost and closed the month at 4,310.8, a gain of +5.7 points, or + 0.13%. In doing so, the S&P 500 quarterly candlestick was a shooting star! A shooting star is a warning that an uptrend may end and a pullback may be coming. For a candlestick to be a shooting star:

  1. There must be a prior uptrend
  2. The upper bit should be at least twice the length of the actual body
  3. There should be little to no lower shade

Keep in mind that this is a 3 month (1 quarter) candle, therefore this chart is meant to be viewed in a long term context. Support below is at Q2 low at 3976.3 and then on the uptrend line from Q1 2018 highs near 3976.3. Below is a confluence of support at Q4 2020 lows and the 38.2% Fibonacci retracement from March 2020 lows to recent summer highs between 3645 and 3663.4. On the quarterly period, the only resistance is the Q3 high at 4551. If the S&P 500 drops in Q4, keep this chart in mind and remember the Q3 shooting star (reversal) candlestick!

Markets could continue to be volatile this week. It may be more event-driven than data-driven (right down to Friday’s job reports). With the OPEC + meeting, the RBA meeting and the RBNZ meeting, there is room for many surprises. In addition, the ongoing US infrastructure debate and the looming debt ceiling debacle could lead to rapid changes in the markets. Add a possible energy crisis, and next week could go crazy! Be on alert this week!

Have a good week-end!


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Al Worden

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