Title: The bear market is nearing its end, but instability can still cause sharp price swings.
This video transcript was created on Tuesday, November 19 at 4:50 am ET, and you can view the video via the link in the description.
If you want to see the market forecast first, go to slide 6.
Howdy, Swings!
Trump's nomination and his campaign promises have had a huge impact on the markets, resulting in a modest increase in market prices.
We correctly predicted that emerging markets such as China, gold, and commodities would fall and the Standard & Poor's 500 Index would fluctuate between 5817 and 5906 points.
However, in a reversal, financial and technology stocks rose slightly at a time when we expected them to fall, which is a good sign for the health of the market.
Unexpectedly, the market opened higher, and the SP500's lower bound of 5880 points held up better than expected.
Does this mean that the period of falling prices is over?
Let's take a look at Fullhapce’s Daily swing market forecast and explore the possibilities.
Let's review Daily Market Index Movements.
With the exception of the Dow Jones Industrial Average, most major indices are up slightly.
The volatility index (VIX) fell by more than 3%.
The probability of a December Federal Reserve rate cut decreased to about 58%.
Oil prices surged, with Brent crude up 3.20% to $73.30 and U.S. natural gas surging 5.00%.
Let's look into Daily sector performance.
There were outperformers in technology, telecom/media, autos, fast food, travel/leisure, consumer staples, consumer discretionary, home goods, certain packaged foods/beverages, energy, utilities, and materials.
There was underperformance in health care, airlines, defense contractors, retail, and ride-sharing.
Let's take a look at some of the reasons why.
On Monday, stocks recovered from their declines late last week.
However, these gains were somewhat uncertain, as investors remain uncertain about various factors related to Trump's second term.
In addition, strong economic data is supporting the idea that the Federal Reserve will leave interest rates unchanged at its Dec. 18 meeting.
The Federal Open Market Committee, which sets interest rates, is expected to keep rates unchanged in December, while Japan's central bank may tighten policy a few hours later.
- In Washington, DC, markets were a little relieved to hear that Trump wants a Treasury secretary who will boost market confidence and drive stocks higher, but anxiety remains...
- When it comes to government finances, Trump's first 100 days in office will require him to hurry up and find a way to fund the massive tax bill he's preparing.
But there are two concerns.
First, with a new Republican coalition that includes many working-class members, cutting social programs could be politically risky.
Second, given the tax cuts currently under consideration, spending cuts are unlikely to significantly reduce the nation's fiscal imbalance.
Here are a few things to consider.
- On Monday, investors discussed how decisions made by President Trump's team are creating uncertainty in the stock market.
However, it's been pointed out that President Trump is well aware of and concerned about how stocks are moving, so he's unlikely to do anything that would consistently reduce market value.
This has been a topic of discussion in Bloomberg and the New York Times.
- Republicans are also well aware of the stock market's concerns about rising deficits.
So they're frantically looking for ways to balance it, especially with the huge cost of the tax bill, which is expected to be introduced within Trump's first 100 days in office.
- There was one glimmer of hope in an article in The Atlantic.
The article suggested that Trump is less likely to clash with Congress regarding the timing of recesses and the appointment of officials during the recess.
- Regarding US financial policy, it was mentioned that the Federal Reserve may not meet on December 18th.
However, the US is still following a financial plan that facilitates financing in the long term.
Here we present the Daily Market Forecast for swings.
The weekly market potential remains bullish, but uncertainty has increased.
The daily market momentum has become neutral due to the influx of funds into the daily bull market.
The daily market is still leaning towards the bearish side, but volatility remains high.
Looking at today's market action, the SPX opened slightly higher at 5875 and rallied to 5906, forming a bullish trap, before falling to 5885 and closing at 5893.
As a result, there is growing uncertainty about the direction of the market and we expect volatility to increase in the early part of tomorrow's trading.
Investors seem to have gained some confidence and moved into bullish positions to some extent, but bearish positions still predominate as they wait for a clear change in the market trend before moving into full-blown bullish mode.
Based on today's sector outlook, we expect emerging markets, China, and gold to continue to rise, while financials and oil will fall.
Although it is difficult to predict due to the high level of uncertainty, we believe that there is an equal chance that the daily market will rise or fall. Indicators are mixed, but there are more bullish signals than bearish ones.
On Tuesday, we could see a bear trap in the morning and the SPX could move between 5847 and 5912.
Then, if China's lending rate decision on Tuesday night comes out favorable for the market, the downtrend could weaken or even turn bullish.
Let's explore some additional insights.
- We still maintain a positive outlook on the stock market.
That's because stocks have performed well at the right time and earnings have been pretty good.
- While the Federal Reserve may decide not to change anything in December, the overall monetary policy set by the government is still supportive of growth.
- The economic information we have right now is at just the right level - not too hot, not too cold, but leaning toward a more confident or "hawkish" stance.
- If politics were not a factor, the S&P 500 could be on track for strong gains through the end of the year.
- But the impact of Trump's next move is unpredictable, and while there are reasons to be hopeful, there are also plenty of reasons to be worried.
Let's look at the counterarguments.
The counter-scenario is that the market is facing another stress test, which could cause prices to fall and the SP500 to fluctuate between 5828 and 5890, as volatility often spikes in a bear market before turning to the upside.
The additional rationale for this scenario is as follows.
- There is a growing concern that President Trump's second term administration could bring unexpected problems for investors due to some controversial decisions involving his team.
- There are many reports that Trump will implement a wide-ranging tariff regime.
- Furthermore, Trump has indicated that he will mobilize the military to implement his deportation plan.
- Despite many promises to rein in spending, no one in the government seems to be focusing on the main factors driving the deficit.
- The monetary situation is not as favorable as before, with speculation that the Federal Reserve will keep interest rates unchanged at its December 18 meeting and the Bank of Japan likely to raise rates on December 19.
- The overall economic picture doesn't look good either, with high valuations, large investments, and falling earnings expectations.
- New data from the Federal Reserve Bank of New York shows that consumers are finding it harder to get loans, with loan rejection rates rising.
- The geopolitical situation in Ukraine has worsened after the country was hit by missile and drone strikes over the weekend.
In addition, the US authorized Ukraine to launch ATACMS into Russian territory.
We believe that the possibility of the opposite scenario happening cannot be ignored given the current volatility.
Traders who agree with the opposite scenario may want to consider waiting for a sustained downtrend.
The Conclusion is as follows.
We believe that the weekly market is bullish with high uncertainty, while the daily market is neutral.
Volatility is high and downside pressure is high, but investors who agree with our prediction that the market will recover after a big drop on Tuesday and close with a modest gain may consider buying on the morning dip.
Also, traders may be wise to consider both out main forecast and opposition scenarios to manage risk effectively.
Thank you for watching.
Fullhapce Intelligence, the best investment partner for swing traders.