Market strategist David Rosenberg has forecasted a potential slowdown in the S&P 500's rally as we approach November, despite the index's impressive 15.9% surge year-to-date, according to FactSet data. Rosenberg's prediction is based on the declining medium-term momentum indicator for the S&P 500, which has been trending downwards since late July. This weakness is apparent across 10 of the index’s 11 sectors, with energy being the only exception.
Rosenberg also pointed out a potential risk for the S&P 500 to test chart and trend support in the 4,195-4,100 area. He perceives this as a reversal in progress of the post-March uptrend. On Friday, the Dow Jones Industrial Average (DJIA) showed a slight increase of 0.1%, closing at 34,660, contributing to its modest growth of 4.4% this year.
In contrast to the S&P 500, Rosenberg sees potential for a year-end rally in the Nasdaq Composite. This is despite his anticipation of stress in the weeks ahead due to a combination of trend and momentum pressure. The Nasdaq Composite has risen by an impressive 30.9% since the start of the year but has recently broken below its post-March trend line, which had served as a support line until August but has now turned into a resistance line.
Despite these observations, Rosenberg still predicts a possible decline for the Nasdaq Composite through late October. He suggests that if it falls below 13,161, this could potentially trigger further weakness towards 12,700-12,600 and possibly even as low as 12,200.
However, Rosenberg also notes that long-term momentum points towards a peak for the Nasdaq Composite around December-January. This suggests that even if there is a pullback in the short term, there is still potential for a subsequent year-end rally, albeit with bearish implications for the long-term primary trend.
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