The big event this week was the Fed cutting interest rates by a quarter point on Wednesday but despite the build-up, there was very little reaction. The market has been remarkably flat for days now with neither the bulls nor bears able to grab much of an advantage.
Selling did pick up Friday afternoon following news that a Chinese delegation had canceled a visit to some farming areas but this market has been so dead lately it doesn't take much news flow to produce a reaction. We are likely to have a series of dueling trade rumors before the new China negotiations start in two weeks. Market players are not very trustful of the positive spin this day so there is probably more risk to the downside than up.
In addition to a lack of any likely positive news catalysts, we will also have to deal with seasonality. It is well known that September has historically been the worst month of the year for the market but what is far less known is that the weakness is mainly due to the third week of the month. Since 1960 the week following the third Friday of September has produced the most negative results of any week of the entire year.
Seasonality is a tendency, not a certainty, but a statistic like that has to make some market players nervous especially after the action Friday where the indices sold off on negative speculation about a China trade deal. The Fed is on hold, earnings season doesn't start for a while and the risk of weak economic news is high. When we combine that with the weak seasonal tendency it is a good time to be careful.
This market has been remarkably resilient dispute an onslaught of negative calls by pundits but it can't manage to produce much upside momentum. The negativity provides support but it doesn't bring in much buying. The market may actually need some downside before it can manage any decent upside.
I expect trading to continue to be quite challenging next week so a high level of flexibility and reaction will be important.
Have a great weekend. I'll see you on Monday.