Subject: A few days of market uncertainty. Any upside potential?
This discussion was created on Thursday, November 21 at 5:11 a.m. ET. A link to this video can be found in the description.
If you want to see the market forecast first, go to slide 6.
Howdy, Swings!
Despite rising political tensions with Russia and concerns about Trump's cabinet nominees, markets were largely unchanged from the previous day.
As expected, emerging market stocks, Chinese stocks, and gold prices rose, while the financial sector fell, sending a false signal that market prices would fall. However, contrary to expectations, oil prices did not fall and the Standard & Poor's 500 Index (SPX) moved in the opposite direction, which was a good sign for the market.
Then, to my surprise, the market made a small gain and then suddenly dropped 60 points in an hour.
Does this mean that there is no uptrend this week and the market will continue to fall?
Let's take a look at Fullhapce's Daily swing market forecast and explore the possibilities.
Let's review Daily Market Index Movements.
Overall, the market didn't move much. Interestingly, the VIX (volatility index) also moved up, which is unusual.
The SPX closed flat at 5917, while the equal-weighted version of the index was up 31 bps and the Dow was up 139 points/32 bps.
The R2K closed flat while the Nasdaq was down 21 points/11bp.
China outperformed, with the HXC and FXI up 144 and 49 basis points, respectively.
US Treasuries came under selling pressure following a tepid 20-year auction at 1pm on Wednesday.
The odds of a rate cut by the Fed on December 18 are around 50/50.
The DXY gained 45 bp and the USD gained 50 bp against the euro and yen.
Brent crude fell 30bp to $73 and US natural gas surged 700bp.
Gold continued its recent rally, up 60bp, and Bitcoin surged 220bp to $9430.
SPX: 5917.11, 0.00% up.
Dow Jones: 43408.47, 0.32% up.
NASDAQ: 18966.14, -0.11% down.
Russel 2000: 2335.2, 0.05% up.
Vix index: 17.16, 4.95% up.
Let's look into Daily sector performance.
We outperformed healthcare, traditional media, consumer staples, steel, and energy.
Underperformers were part of the technology, retail, autos, transportation, and financials sectors.
Let's take a look at some of the reasons why.
- The stock market got off to a bad start on Wednesday as people sold their stocks after the announcement of additional missile threats from Russia in the morning, but it got better as the afternoon progressed.
- The biggest reason why the market hasn't recovered over the past week and a half is that people don't know what to expect from another term of President Trump.
- At the same time, the US central bank, the Federal Reserve, is looking healthier in the US economy, and this has made it less likely that they will cut interest rates in December.
- Investors are not pessimistic about the market for the foreseeable future, and believe that it will be easier to go up than down between now and the end of the year.
- This conviction could come soon, as Wash, Rowan, and Bentsen, the most likely nominees for Treasury Secretary, are all stock market favorites.
- The big news on Wednesday was a very disappointing earnings report from Target, but it's hard to see how that affected the entire consumer industry.
Here are the Things to consider.
- On Wednesday, financial analysts discussed how the market is reacting to Trump's cabinet picks.
The choices appear to be causing anxiety, and Trump is likely to appoint an investor-friendly Treasury Secretary.
- There is opposition to the Trump administration from Republican lawmakers.
They are expressing concerns about the tax bill, which includes huge tariff revenue.
They are also expressing doubts about some of the controversial cabinet appointments.
- Elon Musk and Ramaswamy published an op-ed in the Wall Street Journal on Wednesday detailing their plans to reduce the amount of money the government spends and cut back on government rules and regulations.
- In Ukraine, Moscow appears to be willing to stop fighting if the conflict stops at the current demarcation line, according to media reports.
Meanwhile, the United States is insisting that fighting in Lebanon must stop.
- Target's performance was disappointing, but that seemed to be an isolated issue.
Here we present the Daily Market Forecast for swings.
The weekly market potential is slightly bullish with downside pressure.
More investments have moved to the bearish side and the daily market momentum remained the same bearish as yesterday.
The daily market potential is bearish with very high uncertainty.
Looking at today's market action, the SPX opened at 5920, plunged to 5860 in less than an hour, then traded sideways until 2:30pm, before closing back at 5920.
This has created a lot of uncertainty in the market, making it difficult to predict the direction of the market, and we expect tomorrow's early trading session to be volatile.
Investors seem to be passively following the downtrend without confidence, waiting for a clear market direction.
Sentiment is fragile at the moment and appears to be ready to move quickly once there is more certainty about market direction.
Indicators are mixed, but there still seem to be more bullish signals than bearish signals, and with downside pressure still present, the market's struggles could continue, and we believe the odds of the daily market closing higher or lower are about equal.
It's hard to predict due to the high level of uncertainty, but we could see the SPX move between 5870 and 5955 on Thursday.
Then on Friday, if the final Michigan sentiment report or other variables push the market higher, we could see an uptrend.
Let's look at some additional insights.
- Large companies have been doing pretty well on average, but there have been some unexpected setbacks over the past week and a half.
- Turning our attention to the Federal Reserve, the likelihood of the Fed cutting rates on December 18 looks like a 50/50 coin flip.
- However, since the driving force behind a rate cut is not inflation, but steady and strong domestic growth, I don't think it matters much if the central bank delays.
- Trump's second term remains the biggest question mark.
- Also, if the Fed stops its plans and the SPX, the barometer of the US stock market, weakens as a result, this could create new problems in the coming months.
Let's look at the counterarguments.
The opposite scenario is that rising jobless claims and Russian tensions or other developments could weigh on the market, causing the SPX to move between 5840 and 5940.
Here's another rationale for this scenario.
On Wednesday, October inflation data from the U.K. will show that the cost of goods and services in the U.K. and wages in the eurozone have risen at a significant pace recently.
- The rise in eurozone wage figures is particularly noteworthy because it could spell trouble for the European Central Bank (ECB).
Federal Reserve Governor Bowman said on Wednesday that the central bank should be cautious when considering cutting interest rates.
While lowering rates could potentially spur economic growth, it could also lead to inflation.
The Republican Party faces the difficult task of delivering tax cuts without drastically reducing social spending programs.
- For now, markets do not appear to be overly concerned about the potential risks that a second term Trump administration could bring.
- There is a lot of discussion about the possibility of an end to the conflict in Ukraine once President Trump takes office.
All things considered, we believe this alternative scenario is likely to occur, and traders should keep this in mind when planning their strategies.
Traders who agree with the opposite scenario may see any price dips as a buying opportunity.
The Conclusion is as follows.
We believe that the upside potential of the weekly market is much weakened, and the potential of the daily market is strongly bearish.
However, the extremely high uncertainty is very confusing as it could be a symptom before the market turns bullish in the next few days.
If the direction of the market remains unclear tomorrow, uncertainty is likely to peak.
Traders who agree with our forecast may be wise to buy more while prices are low or wait for a rebound signal.
Thanks for watching.
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