Global financial markets have shifted into October and the final quarter of the year on edge, as investors look to tweak their portfolios for the last three months of the year.
Having come off the back of the worst quarter since 2011, European and U.S. markets have struggled for direction after a quarter and a month most investors would prefer to forget, as concerns about the Chinese economy, weak commodity prices and uncertainty about the direction of U.S. monetary policy weighed on sentiment.
Technical analysts are now looking at the fourth quarter with relative optimism, with hopes high for a a year-end rally across a number of sectors … but not before October sees a bit more selling.
There are a number of key dates to look out for when eyeing more volatility on the Dow Jones industrial average, notably October 5th and October 12th according to technician and chief market strategist at Signal Pro, Sandy Jadeja.
But after then, "this (volatility) lasts until 23rd October, so any rallies that I see at the moment, short-term traders just look to sell into these rallies," he said.
"I think once this has been flushed out, this is going to be a really great year to pick up some bargains. I am going in 2016 as a bull," he added.
Head of Technical Analysis at Cornerstone Macro, Carter Worth, said it would take some time to "change the psyche" of the markets after money has been lost, agreeing that markets need more time to heal before a "buy" signal kicks in.
UBS strategist Julian Emanuel said the investment bank had cut its 2015 year-end price target to 2,125 from 2,225.
He expects strength in equities during the "seasonally favorable" fourth quarter given the consistently solid U.S. economic backdrop, low rates and abundant corporate cash.
"But the uncertainty overhang of politics in Washington is expected to delay the market's moving to new high ground until 2016, as was the case during 2011's ultimately resolved Debt Ceiling Crisis," Emanuel said.
U.S. oil prices tumbled below $40 a barrel in august for the first time since 2009 as U.S. oil producers remained resilient in their efforts to pump crude near record levels.
Jadeja predicts that U.S. crude may dip below the 2003 level of around $37 per barrel, but he is bullish long term.
"We may drop a bit below, any oil stocks or the oil sector until November. Seasonally that has been very weak. But coming into November we could go down to $33, but long term I am going to become a buyer of oil," he said.
Jadeja said 6,250 is the key level to watch on London's FTSE 100 and anticipates a bullish scenario from the end of the month and the start of November. The FTSE gained around 0.8 percent on Thursday to trade around 6,112.
"On the FTSE 100, I would like to see the market close at least for three days above the 6,250 level, that is the key retracement on the upside," Jadeja said.