MARKETS UPDATE and COMMENT ON THE ELECTION (10:00 pm EST)
It's official. Donald Trump will now become the 47th president of the United States. Wall Street was very pleased with this news and demonstrated its approval with a massive equity rally on Wednesday (the DOW rose over 1,500 points). The DOW took a little breather today, but the S&P 500 and NASDAQ added even more gains following yesterday's surge. All three indices are now in record all-time high territory.
Although overshadowed by the election, today was the end of this month's FOMC meeting, but the election didn't seem to alter the Fed's policy path. The Fed cut interest rates by another quarter-point, but Fed Chairman Jerome Powell reiterated that there's a fair amount of economic uncertainty in the path going ahead. He did not rule out the possibility of an interest rate increase next year, but he also stated that "that's certainly not our plan." Powell's cautious tone did not seem to damper the dovish effect of another rate cut combined with a Trump election victory, and equity markets remain buoyed into today's closing bell.
Of course, many people were NOT pleased with the election results, and although Harris was cordial in acknowledging defeat in her concession speech and expressing a desire for a peaceful transition of power, she also encouraged her supporters to not give up their principles and to continue to fight for what they believed to be good for the country. It's too early to determine all the repercussions from this election, especially since Trump will not officially take office until Jan. 20, 2025. The Republican takeover of the Senate would now seem to rule out any plans the Democrats had for attempting to disqualify Trump's win based on "insurrection" charges, but strong discontent over his win by a large segment of the population is already underway, and a lot could happen over the next two months. My main point here is that we should be very cautious in our trading into the start of the new year as all markets could be volatile.
I've mentioned in recent blogs that we might be looking to buy at the final bottoms of our current medium-term cycles in the DOW, S&P 500 and NASDAQ. There's a small possibility that Monday's lows in the DOW and S&P 500 could be the end of their medium-term cycles and start of new ones (last week's low in the NASDAQ was a bit too early for a new cycle). If so, these indices could be quite bullish now. But if these medium-term cycles are still old, a sharp correction down could be just around the corner. We will remain on the sidelines of the broad stock market for now.
Trump's election also seemed to encourage faith in the U.S. dollar as the greenback broke out of a six day down streak and soared back up to close above 105 in the U.S. Dollar Index on Wednesday. Today's dovish Fed news brought it back down a bit, but it remains close to last week's high at 104.64.
A surging dollar usually pushes down gold and silver prices, and that's what happened yesterday and today as both metals plummeted and tested their 45-day moving averages. We are looking for at least a medium-term cycle bottom in both indices soon, but I don't feel comfortable calling that yet. Let's stay on the sidelines of these metals for now.
Crude oil seemed unaffected by the election and seems to be stabilizing at a resistance level just under $72 (Dec. contract chart). Let's stay on the sidelines of this market until we see how the Middle East responds to the Trump election over the next several days.
It's official. Donald Trump will now become the 47th president of the United States. Wall Street was very pleased with this news and demonstrated its approval with a massive equity rally on Wednesday (the DOW rose over 1,500 points). The DOW took a little breather today, but the S&P 500 and NASDAQ added even more gains following yesterday's surge. All three indices are now in record all-time high territory.
Although overshadowed by the election, today was the end of this month's FOMC meeting, but the election didn't seem to alter the Fed's policy path. The Fed cut interest rates by another quarter-point, but Fed Chairman Jerome Powell reiterated that there's a fair amount of economic uncertainty in the path going ahead. He did not rule out the possibility of an interest rate increase next year, but he also stated that "that's certainly not our plan." Powell's cautious tone did not seem to damper the dovish effect of another rate cut combined with a Trump election victory, and equity markets remain buoyed into today's closing bell.
Of course, many people were NOT pleased with the election results, and although Harris was cordial in acknowledging defeat in her concession speech and expressing a desire for a peaceful transition of power, she also encouraged her supporters to not give up their principles and to continue to fight for what they believed to be good for the country. It's too early to determine all the repercussions from this election, especially since Trump will not officially take office until Jan. 20, 2025. The Republican takeover of the Senate would now seem to rule out any plans the Democrats had for attempting to disqualify Trump's win based on "insurrection" charges, but strong discontent over his win by a large segment of the population is already underway, and a lot could happen over the next two months. My main point here is that we should be very cautious in our trading into the start of the new year as all markets could be volatile.
I've mentioned in recent blogs that we might be looking to buy at the final bottoms of our current medium-term cycles in the DOW, S&P 500 and NASDAQ. There's a small possibility that Monday's lows in the DOW and S&P 500 could be the end of their medium-term cycles and start of new ones (last week's low in the NASDAQ was a bit too early for a new cycle). If so, these indices could be quite bullish now. But if these medium-term cycles are still old, a sharp correction down could be just around the corner. We will remain on the sidelines of the broad stock market for now.
Trump's election also seemed to encourage faith in the U.S. dollar as the greenback broke out of a six day down streak and soared back up to close above 105 in the U.S. Dollar Index on Wednesday. Today's dovish Fed news brought it back down a bit, but it remains close to last week's high at 104.64.
A surging dollar usually pushes down gold and silver prices, and that's what happened yesterday and today as both metals plummeted and tested their 45-day moving averages. We are looking for at least a medium-term cycle bottom in both indices soon, but I don't feel comfortable calling that yet. Let's stay on the sidelines of these metals for now.
Crude oil seemed unaffected by the election and seems to be stabilizing at a resistance level just under $72 (Dec. contract chart). Let's stay on the sidelines of this market until we see how the Middle East responds to the Trump election over the next several days.
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