Title: A tipping point is coming, but will it be up or down?
This video transcript was created on Friday, November 22 at 05:03 ET and you can find the link in the video description.
If you want to see the market forecast first, go to slide 6.
Howdy, Swings!
Trump's nomination sent markets higher, and the markets closed higher.
As predicted in advance, the SPX bounced back and forth between around 5870 and 5955. Yesterday was surprisingly uneventful. Today is the third day of some discrepancies between the market and the VIX (volatility index). The market was up, but strangely, the VIX was not rising or falling enough to give the market a healthy signal.
Interestingly, the market rally that started at 10:30am continued throughout the day, but the VIX has been flat since then.
The question now is, will this uptrend continue, or is it just a false signal before the market pulls back?
Let's take a look at Fullhapce's Daily swing market forecast and explore the possibilities.
Let's review Daily Market Index Movements.
Market Levels - The SPX closed up 31.5 points/53 bps to 5948, while the equal-weighted indices jumped 127 bps, the Dow 461 points/106 bps, and the R2K surged 38.4 points/165 bps.
The Nasdaq was a relative underperformer, up 6.3 points/3 basis points.
China underperformed, with FXC and FXI down 100bp and 59bp respectively.
Treasuries were under pressure on Thursday, with rates rising 1-3 basis points across the board.
The probability of a December 18th cut remains in the 50-55% range.
The DXY gained 35bp as the dollar surged 57bp against the euro and 40bp against the pound, but fell 58bp against the yen as expectations of a BOJ hike next month increased.
Brent crude oil rose 210 bp to ~$74.34 and US natural gas rose 550 bp.
Gold is up 80bp to $2,671 and Bitcoin has surged 395bp to $98.18K.
SPX: 5948.71, up 0.53%.
Dow Jones: 43870.35, up 1.06%.
Nasdaq: 18972.42, up 0.03%.
Russell 2000: 2370.4, up 1.51%.
Vix Index: 16.87, down -1.69%.
Let's look into Daily sector performance.
Thursday's rally was very broad-based, but the best performing sectors were asset managers, banks, insurance, data center stocks, semiconductors, software, utilities, capital goods, consumer staples, consumer discretionary, energy, materials, and transportation.
Underperformers were internet, China, health care, and consumer discretionary.
Let's take a look at some of the reasons why.
People focused on President Trump's surprise picks of four cabinet members - Heggess, Gabbard, RFK Jr. and especially Gatts.
Gatz's departure is seen by many as a very good thing.
Speculation about who will be named Treasury Secretary became a major topic of conversation among financial and economic experts on Thursday.
Corporate earnings released Wednesday night and Thursday morning proved that the earnings season, which ended in October, was quite promising.
Most financial reports were positive, with only one serious miss.
Here are the Things to consider.
- Here's what financiers and investors were discussing this Thursday: Republican lawmakers aren't showing the level of insubordination that was expected, which is a development that could be good for financial markets as it means that the checks and balances surrounding presidential power aren't being ignored at the threatening level previously thought.
- While the Federal Reserve may keep interest rates unchanged in December, many officials have hinted over the past few days that there could be rate adjustments over the next few quarters.
This means that the process of lowering rates or creating financial bailouts won't stop anytime soon.
- Reports on earnings or corporate profits at the end of October were largely satisfactory, with a few exceptions here and there.
- Investors should avoid falling into the trap of heated discussions about Nvidia's future financial prospects, which always flare up the day after earnings.
That's because the rise of artificial intelligence (AI) technology hasn't stopped and continues to grow strongly.
- Deere's stock price has rallied despite the fact that its outlook for fiscal 2025 was lower than initially expected, but that means that expectations for many industrial or volatile market businesses are significantly lower.
This could suggest that these lower earnings are now becoming a common expectation within these companies.
Here we present the Daily Market Forecast for swings.
The weekly market potential is weekly bullish with skepticism for the bulls.
Today, some money flowed into the bull market, which slightly weakened the bear market momentum.
As a result, the daily market is mildly bearish and very volatile.
Looking at today's market action, the SPX opened higher at 5945, but fell sharply, dropping to 5885 by 10:30am before rallying higher to close at 5950.
Tomorrow's early trading is expected to be volatile as well.
Investors appear to be looking to test their bullish positions for a second time in the last four days of bearishness. It seems that they are waiting for the final end of the bear market, which may or may not come tomorrow, Friday, as it is not uncommon for the trend to weaken sharply under similar conditions.
According to the sector outlook, emerging markets and gold may go up and oil may go down. Also, biotech and healthcare are currently on the list of bullish sectors, but they may take a break as they have been strong for the last four days.
The indicators are a bit mixed, but there still seems to be more bullish signals.
It's hard to predict due to the high level of uncertainty, but the market could move between 6009 and 5913 on Friday, with the possibility of closing slightly lower.
Then, if the uptrend continues, the market could start a fresh rally towards new highs.
Let's take a look at some additional insights.
- Gates' withdrawal as Attorney General is a good sign that Republicans may not blindly follow Trump's dictates or views, which is reassuring for those who value the system of checks and balances outlined in the Constitution.
- After the election, markets initially rallied, but then faltered amid controversy over cabinet picks. Now, assuming that Gatz is defeated and one of the rumored Treasury secretary candidates is nominated, we can expect the positive reaction to the Trump administration (the Trump rally) to continue. This could have a greater impact later in the year, when market performance improves and economic conditions generally stabilize.
- If RFK Jr. drops out of the race, we could see the current stock market index, the SPX, rise significantly to over 6,000 points. This could continue through the end of 2024.
Let's look at the counterarguments.
The opposite scenario is that the market could be impacted by the Michigan sentiment report released tomorrow at 10am or some other unexpected event, which could cause the SPX to fluctuate between 5900 and 5975.
Other rationales for this scenario include
- Many people are concerned about the recent decisions made by President Trump's new cabinet.
It is becoming less and less likely that the Federal Reserve will cut the key interest rate on December 18th.
Meanwhile, the Bank of Japan is likely to raise interest rates on December 19th.
- So far, the latest financial results from various companies have been mixed.
- The crisis in Ukraine is getting worse and worse.
However, the market's biggest concern is the Trump nomination, and right now, after the resignation of Matt Gaetz, we think a contrarian scenario is unlikely.
Nevertheless, traders who agree with the contrarian scenario may see it as an opportunity to buy on the dips.
The Conclusion is as follows.
We believe that the weekly market is a mild bull market and the daily market is a mild bear market.
At the moment, it looks like the market is holding back on rallies, which could last for another day or two, because it is worried about another red day coming, as the potential downside has not yet manifested itself.
Traders who agree with our forecast can consider buying stocks at the lows we suggested above and adding plenty of protections to their positions, or doing nothing and waiting until the market trend becomes clearer.
We also recommend that traders consider both our base forecast and the opposite scenario to effectively manage risk.
Thank you for watching.
Fullhapce Intelligence, the best investment partner for swing traders.