US Equities short-term risk/reward looks poor but consolidation would likely mark opportunity

Near-term and intermediate-term technical trends remain bullish for US Equities, but momentum has now grown quite stretched heading into this week’s FOMC meeting. The combination of overbought conditions coupled with a near completion of DeMark-based exhaustion signals points to a possible stalling out post this week’s likely Fed rate cut (as shown by Fed Fund futures). While the intermediate-term trends and momentum remain bullish, I don’t find the near-term risk/reward appealing this week with SPX over 6600. Market breadth has declined in the short run (last two weeks), and I suspect that some minor consolidation could prove likely starting mid-week. Given how stretched SPX has become lately, I feel that any daily close under the 5-day rising moving average (SPX-6566) likely could coincide with 3-5 days of weakness. At present, DXY and Treasury yields remain downward sloping, precious and industrial metals remain in short-term uptrends, along with Cryptocurrencies.  Global developed market and Emerging market Equities remain in bullish uptrends.

My thoughts are literally unchanged from last night, and I feel that US Equities are a poor short-term risk/reward with $SPX above 6600 and $QQQ above 590.

As shown below, $QQQ has now signaled a daily “8 count” (out of a possible 9) of the TD Sell Setup count following the TD Sequential and TD Combo (13 Countdown) exhaustion signals since the beginning of September.   Any daily close on Wednesday 9/17 above 584.06 would successfully mark a completed TD Sell Setup and could result in minor consolidation to this rally over the next 3-5 trading days. 

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