Subject: Trump's announcement sparks market rally, reviving 'Trump trade' trend
On Saturday, Nov. 23, the following can be seen in the video link provided.
If you want to see the market forecast first, go to slide 6.
Howdy, Swings!
The news about Trump's nomination yesterday and this afternoon had a positive impact on the markets, and we closed higher today.
As we expected, gold and biotechs rose in value, and the SPX churned between 5913 and 6009.
However, contrary to our expectations, the oil industry did not fall.
Oddly enough, the SPX didn't make any major moves and mostly hovered in the same area, forming the fourth data point of an "ascending triangle" on the weekly chart.
Could this be the end of a downtrend and the start of a new uptrend?
Let's take a look at Fullhapce's Daily swing market forecast and explore the possibilities.
Let's review Daily Market Index Movements.
The market moved higher.
The SPX was up 20.5 points/35bp to 5969, the equal-weighted version of the index was up 80bp, the Dow was up 426 points/97bp, and the R2K surged 42.6 points/180bp.
Treasuries were mixed, with 2yr and 3yr yields rising 3bp, while the rest of the curve was flat.
The odds of a December 18 FOMC rate cut are about 50/50.
The VIX fell about 10%.
Let's look into Daily sector performance.
Friday's gains were fairly broad-based, but standouts included capital goods, discretionary, consumer staples, consumer discretionary, consumer staples, transportation, credit cards/payments, banks, asset managers, insurance, telecom, and autos.
Underperformers - Technology stocks were the main area of weakness on Friday as investors moved into the more cyclical parts of the market.
Let's take a look at some of the reasons why.
- The news on Thursday about the Gates had a positive impact on the stock market on Friday, helping it regain the momentum it had lost from November 6-8.
- Early US economic data released on Friday, known as flash PMIs, further fueled stock market optimism.
- Earnings reports from companies at the end of October also showed positive numbers across the board.
- The combination of these three favorable conditions led to a strong finish to the weekend for stocks.
Here are the Things to consider.
- On Friday, financial analysts were discussing the preliminary US Purchasing Managers' Index (PMI) for November, which came in above expectations.
This was largely due to strong growth in the services industry.
- With the firing of Matt Gaetz, the Senate's role in advising and approving appointments is being strengthened.
This could help restore confidence in the market, which has been shaken by controversies over Trump's cabinet.
- The financial reports from companies released on Thursday night were mostly good, and even those that missed expectations weren't as bad as you might think.
Here we present the Daily Market Forecast for swings.
The weekly market potential looks promising, but uncertainty is very high.
In contrast, today's daily market seems to be trending upwards with less uncertainty.
Today, we observed an influx of funds into the market, which strengthened the bull market momentum.
Looking back at today's market action, the SPX remained in a tight range between 5940 and 5972 throughout the day.
The daily market volatility decreased slightly, and we should see a clearer market trend starting tomorrow.
Investors seem to be holding out hope for a market rally after Trump's nomination of Betsy Mnuchin as Treasury Secretary.
While the downside pressure concerns raised last week remain, investors seem to be more focused on the positive news.
According to our sector outlook, emerging markets and gold miners are expected to move higher, while financials are expected to fall.
In addition, oil and gold may start to decline in the near future, if not tomorrow.
These two sectors have been rising for weeks, so they could fall at any time, but there are no signs yet that they will fall tomorrow.
Even though we did not get the triggering signs, our analysis shows that the market could move within the range of 5950 to 6010 on Monday with SPX, and we think the market will close higher.
After Monday, if all goes well, the rally could continue until the October PCE and FOMC minutes are released on Wednesday.
Let's look at some more perspectives that may help.
- The positive trend we've seen in stocks this week is likely to continue in the coming weeks.
This expectation is driven by a number of factors, including the typical stock market rally after an election and year-end, better-than-expected corporate earnings, and signs that Trump is likely to pick the right Treasury Secretary.
- It is important to note that large technology companies, which dominate the index, typically suffer more under a "Trump trade.
- While we are largely optimistic in the short term, we shouldn't overlook the potentially big risks lurking.
One major concern is the unpredictability associated with Trump's possible second term.
- So far, Trump's narrative has focused primarily on his cabinet picks, but he hasn't even touched on three critical challenges that investors will face in early 2025: deficits, tariffs, and illegal immigration.
- At the same time, the financial environment around inflation and monetary policy is becoming less favorable in the near term.
This is because inflation is rising rapidly, the Federal Reserve is likely to stop raising interest rates on December 18, and the Bank of Japan may raise rates on December 19.
There is also a counter-argument.
The opposite scenario is that the SPX could fluctuate between 5930 and 5980 due to an escalation in the Russia-Ukraine conflict or other unforeseen events.
Here's another rationale for this scenario.
- Last Friday, there were concerns about the economic situation in Europe.
- Despite these lower-than-expected economic data, wage growth in the EU and consumer price inflation (CPI) in the UK were surprisingly high.
These numbers could potentially spell trouble if they are coupled with poor economic performance.
- Next week, a report will be released showing general inflation in the Eurozone for November.
Everyone is expecting both the core and headline numbers to rise, which could throw a wrench in the European Central Bank's plans to cut interest rates on December 12th.
- In addition to Eurozone CPI, there are signs of accelerating forecasts for October's personal consumption expenditures (PCE) in the US and November's CPI in Tokyo.
Taken together, these factors make it more likely that the Federal Reserve will leave its benchmark interest rate unchanged on December 18th.
The Bank of Japan may raise rates later.
- Japan's October headline inflation rate (known as the core national CPI), released last Thursday night, came in higher than expected.
- The continued strength of the U.S. dollar could cause problems for the Standard & Poor's 500 Index (SPX), a stock market index of the 500 largest companies listed on the U.S. stock exchange.
A stronger dollar can negatively impact their earnings per share (EPS) and make their financial situation more challenging.
- Retailers are showing good profit margins and revenues, but are struggling to generate sales due to various pressures on consumers.
We think this is unlikely given the market's positive reaction to Trump's nomination, which has been the biggest issue at the moment.
However, traders who agree with the opposite scenario can still remain cautious and consider using the market's lows as an opportunity to buy more using the DCA method.
The Conclusion is as follows.
We believe that both the weekly and daily markets are in an uptrend.
Monday is likely to be the day that determines the direction of the market, so it would be wise to pay close attention as any major swings in the market could lead to big losses if we are wrong in our bullish forecast.
However, if we are correct, the next few days do not look to be particularly eventful, suggesting that the rally could continue until the PCE and FOMC minutes are released.
Traders who agree with our forecast may want to consider buying more on each dip to maximize profits and set a 'stop-loss' to reduce losses, or hedge against risk by hedging.
Traders may also be wise to consider both the main forecast scenarios and their counterfactuals to effectively manage risk.
Thank you for watching.
Fullhapce Intelligence, the best investment partner for swing traders.