The Stock Market’s Gains May Be Running Out of Gas

[Trading With Larry Benedict]( The Stock Market’s Gains May Be Running Out of Gas By Larry Benedict, editor, Trading With Larry Benedict The fuel behind the stock market’s recent gains might be running out. And the reason is hinted at in key economic reports… Take the monthly payrolls report. Employers created 254,000 jobs during September. Economists only expected 150,000 new jobs. The unemployment rate also fell slightly to 4.1%. These are signs of jobs market strength. Then investors received an updated look at inflation… The Consumer Price Index (CPI) increased by 2.4% year-over-year in September. That was higher than economists were expecting. The core CPI (which strips out food and energy prices) increased by 3.3%. That was also higher than expected. Inflation has moderated over the last two years. But it remains higher than the Fed’s 2% target. Together, these reports are draining the fuel behind the stock market’s recent gains. And the S&P 500 could soon start to react… Recommended Link [Oil Surge Predicted…But Are You Ready?]( [image]( Do you own oil and gas stocks? Or are you thinking about buying some? If so, you need to see [my #1 oil play]( for 2024. But it's NOT oil stocks, futures, or anything you've likely heard about. Rather, it's an unusual way to potentially bank monthly income from the oil and gas markets. [Learn More Here...]( -- Rate Cuts in Doubt The outlook for interest rate cuts has primed the bullish move in stocks since August. The Federal Reserve adjusts interest rates to achieve two goals. Namely, it wants to see full employment and price stability (i.e., low inflation). Lowering rates stimulates the economy and props up the labor market. Additionally, falling interest rates are good for stocks because they reduce borrowing costs for companies. They also make fixed-income investments less attractive. So when the Fed came out and cut interest rates by 0.50% on September 18, the central bank made it clear that the labor market is now the primary focus. That also helped push the S&P 500 to record highs. But September’s strong payrolls report and CPI are clouding the rate outlook. If the Fed cuts rates too quickly, that could stimulate the economy more than necessary and cause inflation to take off again. And inflation is still running above the Fed’s target. So investors are quickly dialing back expectations for falling rates. Before the September jobs report, market odds showed a 50/50 chance of another half-point reduction in interest rates at the Fed’s November meeting. Odds now show no chance of a larger cut. Investors are even starting to entertain the possibility that there won’t be any cut next month. And just as the outlook for interest rates is called into question, the S&P 500 is showing signs of exhaustion. Free Trading Resources Have you checked out Larry's free trading resources on his website? It contains a full trading glossary to help kickstart your trading career – at zero cost to you. Just [click here]( to check it out. Growing S&P 500 Divergence At the end of August, Fed Chair Jerome Powell delivered a speech on monetary policy at Jackson Hole, Wyoming. Powell stated that “the time has come for policy to adjust.” That cleared the way for rate cuts and the S&P 500’s move to new highs. But now the outlook for interest rates is more of a question mark. So the catalyst for the stock market’s recent gain looks uncertain. At the same time, the S&P 500’s chart hints it may be topping out. Take a look: [Click to Expand]( The S&P 500 pushed to new high ground over the last couple of trading sessions. But momentum is moving lower. Look at where the S&P made a higher high at “1.” At the same time, the Relative Strength Index (RSI) hit a lower high at “A.” That divergence is a warning sign. The RSI measures changes in momentum. And now the RSI shows momentum is starting to weaken for the S&P’s price trend. So that’s something to keep a close eye on. If the S&P 500 starts pulling back and the RSI drops below support at 50, watch out. That would be a sign the interest rate outlook is becoming a drag on stocks. Regards, Larry Benedict Editor, Trading With Larry Benedict [The Opportunistic Trader]( The Opportunistic Trader 55 NE 5th Avenue, Delray Beach, FL 33483 [www.opportunistictrader.com]( To ensure our emails continue reaching your inbox, please [add our email address]( to your address book. This editorial email containing advertisements was sent to {EMAIL} because you subscribed to this service. To stop receiving these emails, click [here](. The Opportunistic Trader welcomes your feedback and questions. But please note: The law prohibits us from giving personalized advice. 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