Subject: Markets are hard to read! Markets are rising despite growing doubts. The downtrend continues to resist.
Commentary for this video was written on Wednesday, November 20 at 01:34 ET using the link provided with the video.
If you want to see the market forecast first, go to slide 6.
Howdy, Swings!
Today, Tuesday, we're down on new news about Russia's nuclear policy.
However, Trump's re-nomination and a slew of economic data releases lifted the markets.
Overall, the markets closed slightly higher.
As we expected, gold and bonds rose while financials and oil fell, and the SPX bounced around between 5847 and 5912.
On the other hand, the expected rise in emerging markets did not happen.
The resilience of the market was impressive, as it was stronger than expected.
In particular, it was surprising to see that the markets were already up by 2:00 pm, after a significant overnight decline.
Could this mean the end of the downtrend and the beginning of an uptrend in the market?
Let's take a look at Fullhapce's Daily swing market forecast and explore the possibilities.
Let's review Daily Market Index Movements.
Most major indices were up, with the exception of the Dow Jones.
With the market up, it was unusual to see the VIX up 5%.
The SPX closed well off its morning lows, thanks to a big gain in the Nasdaq Composite.
Treasuries were higher, but just as stocks closed well off their lows, so were yields.
The odds of a December 18 FOMC rate cut are around 60%.
The DXY is slightly lower and Brent crude oil prices are up 20bp to ~$73.45.
Gold rose 75 basis points to $2631 and Bitcoin rose 200 basis points to $9316.
Let's look into Daily sector performance.
On Tuesday, technology stocks were the leading gainers.
In addition to tech, airlines, cruise lines, REITs, consumer staples, utilities, and homebuilders were also strong performers.
Underperformers - Banks, insurance, health care, energy, materials, auto parts, and transportation underperformed.
Let's take a look at some of the reasons why.
- On Tuesday, there was a lot of stock selling in the morning as Russia changed its stance on nuclear weapons, but it wasn't as bad or new news as initially thought.
There was relief that Rutnik was heading to the Commerce Department rather than the Treasury Department, and the market reacted positively to that.
- The market also rebounded in the morning due to strong earnings reports from companies including Walmart.
- There was also optimism about Nvidia's financial numbers, which were scheduled to be released after the market closed on Wednesday.
Iran's announcement that it would stop producing uranium, which could potentially be used to make weapons, also had a positive impact on the market.
Here are a few things to consider.
- Bullish or optimistic investors have argued that President Trump's penchant for keeping the stock market stable could prevent the incoming administration from pursuing changes that would cause too much shock or disruption.
- Financial markets welcomed the news that Lutnick, a well-respected figure, would likely become commerce secretary rather than treasury secretary, saying he would likely be a safer choice for the economy.
- Republicans are pushing back against Sessions' nomination, putting pressure on President Trump to reconsider his pick for attorney general (chief law enforcement officer).
- It is unlikely that the Trump administration will run into major conflicts with Congress and the Constitution over top or cabinet picks.
- Companies that reported financial results on Tuesday morning were mostly upbeat.
- Despite the difficult situation in Ukraine, which has been going on for over two years, news about Russia's nuclear strategy is not shaking things up much.
- According to a recent report from the International Atomic Energy Agency (IAEA), Iran has agreed to stop processing potentially dangerous levels of uranium, a move that could reduce friction in the Middle East.
Here is our daily market forecast for swing traders.
The weekly market potential is still bullish, but slightly weakened due to high uncertainty.
Today, the bearish momentum is strengthening as money inflows are detected into the market.
As a result, the daily market is currently leaning towards the bearish side and uncertainty is very high.
Looking at today's market behavior, the market opened lower at 5855, but quickly recovered, rising to 5923 at 2:00 pm before falling slightly to close at 5915.
There are also many conflicting forecasting indicators, which can make the daily market choppy.
Investors seem to lose confidence and move to the bearish side, then hesitate at the end of the day, as if waiting to see the Chinese loan prime announcement and Nvidia earnings.
Ironically, the end of the downtrend seems to be delayed as investors are nervous about the possibility of another pullback, as today's decline was not significant.
By sector, the outlook is for emerging markets, Chinese stocks, and gold miners to rise, while financials and oil production are expected to fall.
The caveat is that healthcare/biotech is waiting to be named as a sector to rise soon, and it could happen sooner.
Our indicators are generally showing more bullish signals than bearish signals.
It's hard to predict due to the high level of uncertainty, but on Wednesday the SPX could move between 5965 and 5890, with the possibility of a slight uptick from yesterday's close.
However, it could still struggle with existing downside pressure and could be heavily influenced by NVidia's results.
Let's look at some additional insights.
- Given the market trend, the bull market has two strong supportive factors: favorable year-end results and strong corporate profits.
- Even if governments and central banks don't lower interest rates, we think they will eventually help the market.
- It is unlikely to hurt stock market investments (stocks) because Trump will offset import tariffs (tariffs), fiscal shortfalls (deficits), and harsh immigration/deportation policies with deregulation (deregulation) and tax cuts.
While market bulls argue that Trump will keep an eye on the market and implement policies that will do no harm, his cabinet picks so far do not seem to support this view.
- We have previously noted that Trump's first term in 2016 was a much better investment environment than today.
There is also a counter-argument.
The opposite scenario is that the Chinese prime lending decision is disappointing, or for some other similar reason, the SPX could fluctuate between 5870 and 5940.
Here's another rationale for this scenario.
- There was a lot of discussion on Tuesday about the market jitters caused by Trump 2.0.
This was due to President Trump's controversial new cabinet appointments before the main risks were even resolved.
There is a common belief that investors are not worried enough about these risks.
- Many media outlets are reporting that Trump is very willing to implement a wide-ranging tariff regime.
At the same time, the Republican Party is struggling to balance the books on the massive tax bill it plans to introduce in the first 100 days of the new administration.
- Tensions surrounding Ukraine are rising significantly as Kiev begins firing ATACMS at Russia and Moscow officially adopts a new nuclear doctrine.
- Financial policy may not remain as favorable next month.
That's because the Federal Reserve could keep interest rates on hold and the Bank of Japan could raise them.
- The WSJ reports that the outgoing Biden administration is taking final steps against large corporations.
These include proposals that Google must make significant changes to its business operations, potentially halting business deals between Juniper and HP Enterprise, and investigating Microsoft's cloud practices.
- Walmart's success doesn't necessarily reflect a prosperous consumer market.
Rather, it could mean that it continues to capture a larger share of the market.
- The financial results of home improvement company Lowe's were no exception.
With the exception of a sales boost from recent hurricane activity, the company's performance was merely adequate.
We believe the opposite scenario is possible, given that downside pressures are still active.
Traders sympathetic to the opposite scenario may want to consider buying a bit more at the lows and then adding protection given the intense volatility.
Conclusion.
We are seeing a very confusing market, with the weekly market up, while the daily market is down.
The market is leaning towards the bearish side with a lot of uncertainty, but there is still potential for a bull market.
Perhaps tomorrow, the direction of the market will become a little clearer.
Traders who agree with our forecast may be wise to buy a bit more on the lows that may come Wednesday morning and protect their assets with "stop-losses" and hedging to take advantage of any gains.
Traders may also be wise to consider both the main forecast scenario and the counterfactual scenario to effectively manage risk.
Thank you for watching.
Fullhapce Intelligence, the best investment partner for swing traders.