The Short-Term TOP & POP!

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Currently, it is still very early days and the dust has not yet settled, however, I will make a bold forecast that the SPX is still in a BULL UPTREND from 2009.

There has been a paradigm shift in the U.S. after Trump’s election. The expected fiscal stimulus and increased government spending have ‘buoyed’ financial markets. The closed at 2213, for the first time in history on November 25th, 2016. The shift in market sentiment has sent 10-year treasury yield topping at 2.3%, for the first time this year, as markets anticipate higher inflation.

The pessimism of Americans suddenly turned around into a “wave of optimism”.  The Trump victory created Investor optimism.  Americans were speaking with their wallets as they have grown tired of all the negativity.  Per the AAII survey, the bullish sentiment rose 3.2% to 49.9%.  This is used as a contrarian indicator indicating that a reversal is near in U.S. Equity markets: (http://www.aaii.com/sentimentsurvey).

Investor optimism about stock prices has risen to the highest level(http://www.forbes.com/sites/investor/2016/11/21/investor-optimism-jumps-to-nearly-47/#7e5dc620792e) Deutsche Bank believes that the SPX will reach the 2,500 level. (http://www.zerohedge.com/news/2016-11-20/why-deutsche-bank-thinks-sp-going-2500-next).

 

The New Golden Era For Investor!

Trump’s election victory speech which promised fiscal stimulus and government spending on infrastructure has inspired optimism among both investors and analysts.

According to a recent Gallup poll, ( http://www.gallup.com/poll/197519/half-americans-confident-trump-election.aspx) more than half of Americans are now more confident in President-elect Donald J. Trump than they were before the election. Americans are embracing a more positive and promising outlook for the future. This pro-business president-elect, who wants a reduction of government red tape and insisting that the U.S. negotiate better trade deals, has certainly brought about great optimism to the equity markets.

The FED is planning on allowing the economy to run HOT. Investors expect inflation to increase and defaults to drop. This is exactly what the market has priced in.

In equity markets, the hot sectors are financials, industrials and materials. These sectors will rotate back into favor in order to take the SPX to new highs. Financial stocks have lead this rally to new highs. This sector will do better under Trump as he will be able to appoint regulators who are more industry friendly than regulators appointed by President Obama.  The whole financial sector (XLF) could outperform most other sectors to have a better four years then they have had. If we start to see higher U.S. interest rates, banks will have better lending practices.

Under the new Trump administration, corporate money that is ‘parked’ overseas would be ‘repatriated’ which, in turn, could lead to huge share buybacks. (https://www.bloomberg.com/news/articles/2016-11-21/goldman-how-corporations-will-spend-their-huge-piles-of-overseas-cash).  Last week, there were cash inflows of $3 billion.

Can the markets continue to rise yet?  Yes.  With indicators being positive, as they are, it is possible that the markets will continue to move yet higher.  We are currently in the Bullish seasonality period associated with rising markets., therefore, the SPX will easily push to another new high.  My preference is for a retracement/correction, NOT a reversal here. The markets are at a level where the markets could have a ‘corrective’ move down (a little profit taking).

Using Candlestick Pattern:

BEARISH ONE BLACK CROW appeared on the last candlestick pattern of November 28, 2016. 🙁http://www.candlesticker.com/Pattern.aspx?lang=en&Pattern=2211).  understand and Implementing Elliot Wave Analysis!

 

Elliott Wave (2) corrects wave (1), but can never extend beyond the starting point of wave one. Typically, the news is still bad. As prices retest the prior low, bearish sentiment quickly builds, and “the crowd” haughtily reminds all that the bear market is still deeply ensconced. Still, some positive signs appear for those who are looking: volume should be lower during wave two than during wave (1). Wave (2) usually unfolds as a simple 3-swing abc pattern. Wave (2) is the first correction following the initial swing off an important high or low.

Elliott Wave (3) is usually the strongest and longest wave.

Elliott Wave (3) is usually the largest and most powerful wave in a trend. The news is now positive and fundamental analysts start to raise earnings estimates. Prices rise quickly, corrections are short-lived and shallow. Traders/Investors desiring to “get in on a pullback” will likely miss the boat. Trading the Wave (3) is usually the most profitable!  Elliott Wave (3) is usually the longest and strongest in a completed 5 wave sequence.

The 4 Hour Time Frame:

This is the SPX 4-hour chart.  It is one of my favorite time frames to monitor.  It gave a BUY signal on November 14, 2016.  It signals an exit, on November 25, 2016, which is when the “correction” started to occur.

 

The market’s attention is shifting back to the economic data being released this week.  These reports are on GDP, personal incomes and nonfarm payrolls making headlines. The U. S. economy is forecast to add 170,000 nonfarm jobs in November 2016. I believe this will support the FED to raise interest rates next month.

The information I am sharing is pure gold. There is always something new to invest in the market place. Currently, I see several areas that are starting to look very interesting!

Last month subscribers and I closed out 3 winning trades: EDZ 20.7%, NUGT 11%, and UGAZ 74%. We did take one loss on TMF of 8.2% but overall it was an awesome month for ActiveTradingPartners.

We are currently in a new wave of winning positions in dollar, corn, and cotton.

If you want to follow my trades in real time be sure to join my trade alert newsletters.

Chris Vermeulen
www.TheGoldAndOilGuy.com
www.ActiveTradingPartners.com