Title: SPX hits record highs, what's next?
The following is a shortened version of the video script that was produced on Wednesday, November 27 at 07:38 ET.
The full transcript can be found at the link provided in the video description.
If you want to see the market forecast first, go to slide 6.
Howdy, Swings!
The markets were a bit shaky in the wake of President Trump's recent tariff announcement, but they quickly recovered and ended the day higher.
As we expected, gold and energy prices fell, while healthcare stocks and the S&P 500 (an index that measures the stock prices of the 500 largest companies) rose, pushing above 6010.
What was unexpected was that financials avoided the decline, which was a good sign for the market overall.
Interestingly, the market didn't panic after the tariff news and continued to move higher.
Now that the SPX is at an all-time high, everyone is wondering what will happen next.
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 one index, R2k, almost all of the indices appear to be up.
US equities performed well, with the SPX, Nasdaq, and Dow all rising, while the equally weighted S&P and R2K underperformed.
Treasuries traded in a flat to weak range.
The odds of a Fed rate cut on December 18 rose to 65% after the FOMC minutes.
The DXY rose ~18 basis points.
Daily Market Moves.
SPX: 6021.63, 0.57% up.
Dow Jones: 44860.31, 0.28% up.
NASDAQ: 19174.3, 0.63% up.
Russel 2000: 2432.4, -0.76% down.
Vix index: 14.10, -3.42% down.
Let's look into Daily sector performance.
Data center-related utilities, anti-obesity drugmakers, consumer staples, travel/leisure, technology, insurance, and aerospace/defense outperformed.Auto, banking, semiconductors, technology hardware, housing, energy, materials, and transportation underperformed.
Let's take a look at some of the reasons why.
- On Tuesday, small and equally diversified companies, represented by the S&P Equal Weighted Index and the small-cap Russell 2000 Index, did not perform as well as the larger companies listed in the S&P 500.
Still, even taking into account President Trump's announcement of tariffs, stock market performance was quite good.
- Despite the potential negative consequences of these tariffs, the stock market remained fairly stable.
This raised the question: Are investors doubting Trump's sincerity in imposing the tariffs? Are investors indifferent to the threat? Or are they only concerned about certain aspects?
- It seems to be a combination of all these thoughts.
Few investors believe that the full tariffs will be implemented by the scheduled date of January 20th.
Even if some tariffs are imposed, the general consensus is that the overall impact will be manageable.
While some specific industries may be negatively impacted, the economy as a whole and major tech companies are not expected to be significantly affected.
- Instead of staying out of the stock market entirely, investors on Tuesday shifted their investments away from sectors that have benefited from Trump's policies (the "Trump trade" sectors) and toward tech stocks.
- Other important events on Tuesday were related to corporate earnings, economic statistics, and international political events.
These also likely influenced investors' decisions.
Here we present the Daily Market Forecast for swings.
- Markets are starting to react less spontaneously to Trump's comments and social media posts.
The market now understands that there is a big difference between what Trump says online and what happens in the real world.
- Senator Grassley said that for now, Trump's threats to impose tariffs should be viewed as bargaining chips, not actual actions.
- With the news of Kevin Hassett's nomination to head the National Economic Council, the market is taking this as a positive.
- There is strong momentum in the stock market right now, with a positive outlook for the rest of the year and after the election.
The market seems to be focusing more on the expected gains if Trump returns to power than on potential downsides.
- The latest update of the Case-Shiller index showed that home prices fell in September.
- The minutes of the Federal Open Market Committee (FOMC) meeting released on Tuesday did not make any significant changes to the stance of monetary policy.
However, they were generally positive, with a more optimistic outlook for economic growth and expectations that inflation will continue to hover around 2%.
- The semiconductor industry reported encouraging results with strong earnings and guidance from companies like ADI and SMTC.
- Retail reported disappointing results, with companies facing significant long-term hurdles.
However, this should not be seen as a sign of weak consumption.
- On the geopolitical front, global political tensions may ease as the Israeli cabinet agreed to a ceasefire in Lebanon.
Here is our daily market forecast for swing traders.
The weekly market is bullish as it was yesterday, but with increased uncertainty.
Today, the market bullish momentum has increased slightly as we detect a continuous flow of money into the bull market.
As a result, the daily market potential is bullish, but uncertainty has increased a lot.
Looking at today's market action, SPX opened higher at 6000 and continued to move higher to close at 6020.
Investors seem to be holding on to their bullish positions but questioning what will happen next.
They may want to see if the SPX breaks above the resistance level of 6040 before moving more aggressively.
After yesterday's close before the market broke through key resistance, investors are worried about the possibility of a market pullback.
Our sector outlook suggests that emerging markets and gold miners could move higher and financials could move lower.
It's also too early to tell, but bonds, real estate, and biotech/healthcare could fall in the near future.
Nevertheless, our indicators are mostly showing bullish signals.
According to our calculations, the daily market could close bullish with the SPX moving between 5995 and 6050.
The market rally could then be reinforced by the tech sector if Google's earnings, Japan's CPI, or other economic conditions are favorable for the market.
Let's explore some additional insights.
- Strong market activity after the election and during the year-end period offset the potential negative impact of Trump's proposed tariffs, and this trend should continue to energize markets through the end of the year.
- We remain concerned about the discrepancy between the current Trump administration's description of its policies ("Trump 2.0") and the actual expected outcomes.
However, markets do not seem to be focused on this issue at the moment.
- When it comes to monetary policy and inflation, we expect to see indicators pointing to higher inflation in the near future.
While the decisions that central banks will make next month may not be as favorable for stocks as they have been in the past, this scenario is unlikely to seriously undermine the Standard & Poor's 500 Index (SPX).
- In the end, what matters most is the health of corporate earnings.
In other words, if a company remains profitable despite other issues, that's the most important factor to consider.
Let's look at the counterarguments.
The naysayers argue that certain factors such as PCE, jobless claims, or other circumstances could weigh on the market, causing the SPX to fluctuate between 5980 and 6030.
Here's another rationale for this scenario.
- On Tuesday, stock market experts predicted that the market will not suffer much from potential issues in Trump's second term administration.
These risks consist of topics such as import taxes, government spending deficits, and immigration issues.
- Even if Trump's threat of a 25%/10% import tax, announced on Monday, doesn't materialize, we could still see higher taxes in 2023-2028 than today.
This unpredictable policy direction can make companies nervous.
- Biden's move to expand support for obesity drugs is now a big mandate for Trump.
It may be difficult for Trump to reverse this benefit, highlighting the big problem the government faces when trying to reduce spending.
- There is still a big gap in perceptions of "Trump 2.0's" fiscal strategy, with grandiose plans for tax cuts, unrealistic assumptions about cost savings, and bond markets suspicious of larger deficits.
- Mexico sent a message to President Trump on Tuesday explaining the negative impact of the import tax and warning of possible retaliation.
At the same time, Canadian oil producers warned that Trump's import taxes could drive up oil prices for US buyers.
- Trump may impose fines on Chinese banks allegedly involved in the drug fentanyl trade, according to Reuters.
- Trump plans to ditch Biden's venture to forgive billions of dollars in student loans, which could have a negative impact on consumer confidence, according to a report from Politico .
- Retailers performed poorly on Monday night/Tuesday, with Best Buy, Burlington Stores, Kushtad, Kohl's, Leslie's, and others reporting less-than-stellar results.
- New home sales data for October came in below expectations at 610,000 units.
- Oil prices could rise as OPEC+ will decide whether to delay planned production increases at its December 1 meeting.
- An Exxon executive warned that Trump's pro-drilling policies may not lead to increased domestic production, as many companies are focused on generating more revenue and providing a return on investment rather than increasing output.
- He emphasized that Russian troops are advancing rapidly in Ukraine, and political and military tensions in the region continue.
Considering that the SPX has reached its all-time high and the market is under significant downside pressure, we believe the opposite scenario is also possible.
Traders leaning towards the opposite scenario should be extra cautious as the SPX could fall further over the next few days.
The Conclusion is as follows.
We see both the weekly and daily markets as bullish.
It would be wise to pay close attention on Thursday, as there is a risk of a pullback if the market moves in the opposite direction.
However, if our forecast is correct, the bull run could continue on Friday.
Traders who agree with our forecast may want to consider hedging their risk by setting a 'stop-loss' or hedging to maximize profits and reduce losses by buying more at each dip.
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.