As thoughts settle and details surface about the implications of an insurgent US presidency, we can talk about fundamental changes to come for the markets. But for now our job is only this… to either confirm or negate our path for the markets.
Gold has shot upward on Trump, but is below the highs of just last week. The US stock market has tanked on Trump, but is above the lows of just last week. Global markets are down and mixed (at best), technically as are commodities, generally. In other words, according to the technicals we are within the parameters of the current analysis and on the plus side, we have a huge macro event behind us with the FOMC rate hike “decision” upcoming in December.
If gold opens as it is currently indicated (+26.30 at 5:04 US Eastern) it will open at 1300, testing the SMA 50 on the upside. Gold remains in a daily downtrend.
If silver opens as indicated in pre-market it would be at 18.66; again, below yesterday’s and last week’s highs. Silver remains in a daily downtrend.
HUI looks to bounce today but does not even think of doing the first thing to breaking its corrective daily downtrend until it gets above the 50 day moving averages (converged at 221).
S&P 500 is indicated to drop 41.50, which would put the open at 2098. The market’s status remains corrective, but this is merely a blip at this point. The ultimate parameter to a confirmation of major support or failure and likely bear market is the June low, below 2000. For now, as expected, SPX is back on a test of the SMA 200 after stopping the ‘hope’ bounce perfectly, at the SMA 50 yesterday.
So we hold with the ‘ongoing test of major support’ scenario. We can note the research from NFTRH 420 showing some bad things for year +1 (2017) when a Democrat hands off to a Republican (-10.2% for S&P 500) and take even more notice about what happened when 2-termer Clinton handed off to Bush in 2000 and 2-termer Bush was finishing up and handing off to Obama in 2008. Those were market busts and recessions during the ongoing phase of ever more intense centralized monetary policy. But for now, absolutely nothing has changed in our plan for an ongoing test of major support.
As for global markets, the Trump victory has weakened the US dollar and strengthened the Euro and Yen, neither of which are helping the European and Japanese stock markets. Commodities are mixed and little that I can see has changed to the current views other than a massively inflammatory news (and eventual macro fundamental) event has shocked the system. This too shall pass and the markets will settle into their course.
A major theme seems to be that nobody knows what a Trump presidency is going to mean and the markets will be volatile as that gets sorted out. I agree with that, but as of now we remain within the parameters that we’ve already been following. So the good news is that we can continue managing as we have been and even look forward to a smoothing out as Trump Day 1 fades into aftermath, the holidays approach, US stock markets test major support, global markets get sorted out and FOMC brings a likely rate hike in December, now that they no longer need to play politics.
On a final note, long-term interest rates are rising and short-term rates are declining on the news. That is inflationary signaling on the long end and flight to the liquidity of notes on the short end. It is also bumping the yield curve up today, which is also in line with current themes. Again, the news is inflammatory and things will probably be volatile in both directions, but this theme also remains in line with current analysis.
Here was the already constructive state of the curve (still above the SMA 200) as of yesterday’s close.