New President in the White House!New President in the White House!
Alas, the historic week over, the 45th President of the United States of America, Donald J. Trump, was sworn in this past Friday, with much fanfare – and much protest – on Capitol Hill, Washington D.C. The whole world was speechless, waiting in eager anticipation, to hear the new president’s inaugural address and read into the steps and changes the 70-year old with the flamboyant blonde comb over wants to undertake from the seat of power.
The speech, the likes of many to which we’ve already become used to, was chock full of fiery criticism, replete with patriotism – and a renewed promise to put America back in the center on the world stage. Markets, which opened up Friday up, shed their gains in the afternoon, as pictures of rowdy protestors inflicting damage countrywide streamed through media circuits. As trading neared its close, the effect dissipated slightly with the 3 large indexes ultimately ending up, the Dow cutting a 5-day losing streak and ending about half a percentage point higher, propelled by Merck, Procter & Gamble, and IBM, the latter hitting analyst forecasts in its quarterly reports, despite its continued drop in earnings.
The waiting period has ended – and the market needs to choose a direction after having seen price consolidation that has already lasted a number of weeks, marked by sideways trading. One catalyst is likely to be the earnings season, which will pick it up a notch this week with 80 companies on the S&P 500 releasing their Q4 2016 results, any shortfall vis a vis already inflated expectations likely to send companies that disappoint into freefall.
It’s important to note that the market which rose in December to the tune of a “Santa Trump” rally, now finds itself very close to historical highs. Stocks are fully priced, and for the Dow to break up the long sought after 20,000 point level, we’re going to need to see reports that pack a powerful punch. Among this week’s reporters, we’ll find Johnson & Johnson, Abbott Labs, from the pharmaceutical industry, and AT&T and Verizon from the telecom industry, along with some giants from the industrial and security sectors the likes of Boeing, Lockheed Martin, United Technologies and 3M. The latter companies will most certainly command attention, beyond earnings, the next most important factor being the steps taken by the new Trump administration and the winds of change from the Oval Office. Investors, until now, have applauded Trump’s rhetoric, and now they want to see if he can put his money – or to be more precise, the Federal government’s money – where his mouth is!
Uncertainty levels are high, the challenges the new president will have to grapple with including the U.S. dollar, Russia, China, and their southwest neighbor, Mexico. The yields on 10-year bonds have climbed since the election results were publicized to 2.475% from 1.865%, investors expecting a spike in inflation. Trump’s plans, from bolstering the navy fleet, trade policy and infrastructure spending – along with gutting Obamacare and lowering drug prices, promise to create drama for all market sectors, and investors need to be open to the changes afoot and the new dynamics, while at the same time, keep up with the president’s barrage of twits, and presidential orders.
Weekly Summary: Friday’s gains didn’t succeed in erasing the week’s losses, indexes ending down for their second straight week, though movement still stayed rather sedate. The Dow and the NASDAQ ended off by 0.3%, the S&P 500 shedding 0.2%.
This Coming Week: There’s still a lot of politics about on Wall Street between the earnings season and economic figures from the housing and manufacturing sectors. Perhaps most importantly, on Friday we’ll be getting economic growth figures (GDP) along with the Consumer Confidence Index.
It will definitely get interesting – and fast!
SPY Technical Perspective:
The narrow sideways trading range is still in place, the index unsuccessful in breaking up past the $228 level on the Exchange Traded Fund (ETF), buyers showing up at the 225 point level, with the 20 period EMA adding support and helping prop up the market. Therefore, these two levels can be said to be the key. If all goes according to plan, a breakup would bring us up towards 231 on the SPY; a decline would bring us to the 222 point level, at which point the 50 period EMA will await. After that, the next support level will be December’s low at $219.
Have a great trading week!