On Wednesday we will receive guidance from the US Fed on monetary policy and the timing of the central bank plans to taper its $US120 billion in monthly bond purchases. Markets are expecting a scaling back of emergency pandemic-era monetary policy to begin in November or December.
S&P500 Q3 earnings need to deliver US$50 of average earnings per share to support the current valuations. Analysts are expecting Q2 to be the peak of the recovery for many companies and some tapering off in earnings is now likely.
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We note the S&P500 index short-term indicators have rolled over and we would need to see a reversal and a rally back through 4485 to negate the current sell signal.
