S&P 500 in for a 'bumpy ride, but path should be higher': BTIG

Despite expectations, the anticipated false breakout in the S&P 500 following the FOMC rate cut decision did not materialize.

Looking ahead, the benchmark index is expected to have “a bumpy ride, but [the] path should be higher,” investment bank BTIG said in a note.

Although the market remains in a seasonally weak period, BTIG strategists note the importance of respecting the new highs in both the S&P 500 and the equal-weighted S&P 500. Moreover, the cumulative advance-decline line continues to climb ahead of price, which, while not ruling out short-term weakness, "typically bodes well for the medium term."

Analysts acknowledged that the market is still within the worst seasonal stretch of the year, but they expect any weakness leading into October to be brief, as seasonality improves by mid-month.

The investment firm also pointed out a bullish shift in high beta versus low volatility stocks, which have staged a comeback but are now testing key resistance. "Clearing that would be another bullish shift," BTIG says.

Sector-wise, semiconductors are showing lower highs in both absolute and relative terms, while the software sector has broken out after a seven-month consolidation.

The strategists remain cautious on consumer staples, and recommend trimming energy positions after a “nice tactical bounce.”

Moreover, they suggest locking in some profits on gold, which has rallied but is entering a seasonally weak period, with the potential for short-term weakness into October.

“Since 2011, Sep. is the worst month for GLD (NYSE:GLD ) down 10 of 12 years. The two times it was up in Sep., it was then down in Oct. by nearly 3% both times,” BTIG highlighted.

Lastly, the firm points out that Cyclicals have broken out to fresh highs, with several stocks, including Caterpillar (NYSE:CAT ), DuPont (NYSE:DD ), Stanley Black & Decker (NYSE:SWK ), and Eastman Chemical (NYSE:EMN ), displaying strong charts.

Source: Investing.com