The end of the week, month, and quarter has arrived!

What does this mean for the stock market? The end of the quarter is typically a time of higher volatility. Why? Some of the biggest players in the stock market will reallocate funds, and rebalance their portfolios. 

In particular, hedge funds use the end of the quarter to rebalance their sheets and take profits. This usually causes higher amounts of volatility as they buy back short positions, or sell other positions. Funds typically do this before their next quarterly report. 

Market Open

The market found itself opening below 3,650 on the S&P 500 futures. This level marked the line in the sand for the day Henry Gambell, Sr. Managing Director of Options Trading at Simpler Trading. Gambell stated that if the market were to open below and stay below 3,650, the market could continue a sell-off to end the quarter. Another relief rally can ensue if the market gets above and holds the 3,650 level or at least a visit to 3,700.

Friday morning started with the catalyst of the Personal Consumer Expenditure Index (PCE) data release. The Federal Reserve has already said that PCE would play a key role in deciding future rate hikes.

The PCE report came in at 0.3%, a 0.4% increase month over month from the previous report at -0.01%. The year-on-year data beat the expectations of 4.7% by coming at 4.9%. Marry Ellen McGonagle, Senior Managing Director of Equites at Simpler Trading, had this to say in her mid-week report, “Analysts are expecting an increase in the core PCE Index of 0.5% for August and we expect that any number below this to spark a rally”.

On Thursday, Apple led the selling after the market erased the previous gains on Wednesday. The significance of Apple being amongst the most substantial selling is that Apple has led the market all year. It will be difficult for the market to make any significant push higher as long as Apple struggles. Apple being below 142 brings vulnerability for the tech giant.

As TG Watkins, Director of Stocks at Simpler Trading, has previously mentioned, if the market is going to break out of bearish sentiment from the macro perspective, it will need to happen on the backs of Apple and big tech. Moving forward, the Nasdaq should be watched closely by traders. 

Todays Action

The Nasdaq has yet to make a new low on the year, whereas the S&P 500 already has.

The last thing to look out for as the quarter concludes is the U.S. Dollar Index ($DXY). The $DXY has recently broken above previous 20-year highs closing Wednesday’s session slightly above $114.

When the U.S. Dollar Index rises, it isn’t suitable for the market. The rise of the $DXY can be viewed as an inverse to what you should expect the market to do. 

Beyond the previous high on $DYX, there is another level to watch out for and be aware of above heading into quarter four. 

The level to watch for on the $DXY above $114 is $121. 

$121 is the highest the index has traded this century. The print came back in July of 2001. The break of $121 could potentially cause a significant ripple effect in the market. 

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