Next week could be critical in determining whether stocks at all-time highs can sustain their momentum, at least for a little while longer. The Dow Jones Industrial Average topped 42,000 this week for the first time ever, while the S & P 500 breached the 5,700 milestone, after the Federal Reserve cut interest rates by a half-percentage point. But the next several trading sessions could determine whether the big post-Fed rally can continue, especially as investors brace for October — a historically weak period for equities that could be even more volatile than usual because of the approaching U.S. presidential election. “A lot holds in the balance of the next couple or few days,” said Katie Stockton, founder at Fairlead Strategies. .SPX 5D mountain S & P 500 As of Friday afternoon, the 30-stock Dow, the S & P 500 and the Nasdaq Composite were each higher by more than 1% for the week. ‘Pending confirmation’ Now that the S & P 500 has made it past resistance at 5,670, Fairlead Strategies’ Stockton said she is carefully monitoring that level over the next few days to see whether the breakout can continue — though some signs of exhaustion are giving her pause. The breakout is “‘pending confirmation,'” Stockton said. “And the confirmation is important to us, because there’s usually nothing worse than a non-confirmed or false breakout.” For the S & P 500, a confirmation would be a “bullish short-term development” indicating the broader index could rise to 5,935 over the next three to eight weeks, she said. That’s a roughly 4% rise from current levels. The technician, who anticipates a seasonal correction in October, expects a confirmation would also minimize any pullback next month, while a breakdown could signify a deeper one. “If we did see the breakout confirmed, that would probably minimize the corrective phase that we’re expecting,” Stockton said. “It wouldn’t mean that we can’t see a pullback, but the correction into sort of that 5000 range would be made less likely by a breakout, in my opinion.” Overall, Stockton expects that the longer-term setup for the S & P 500 is “a bit overdone.” She expects stocks will be in a trading range environment for the next nine months. The broader index was last hovering around the 5,700 threshold. Softer economic readings, vanquished inflation? At least in terms of the calendar, it appears that stocks will have plenty to test its advance in the coming week, as a raft of economic reports are anticipated to show…
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