Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
US Presidential Election Year Stock Market Seasonal Trend - 29th Nov 24
Who controls the past controls the future: who controls the present controls the past - 29th Nov 24
Gold After Trump Wins - 29th Nov 24
The AI Stocks, Housing, Inflation and Bitcoin Crypto Mega-trends - 27th Nov 24
Gold Price Ahead of the Thanksgiving Weekend - 27th Nov 24
Bitcoin Gravy Train Trend Forecast to June 2025 - 24th Nov 24
Stocks, Bitcoin and Crypto Markets Breaking Bad on Donald Trump Pump - 21st Nov 24
Gold Price To Re-Test $2,700 - 21st Nov 24
Stock Market Sentiment Speaks: This Is My Strong Warning To You - 21st Nov 24
Financial Crisis 2025 - This is Going to Shock People! - 21st Nov 24
Dubai Deluge - AI Tech Stocks Earnings Correction Opportunities - 18th Nov 24
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

US Stock Market Update as the Trump Inauguration Approaches

Stock-Markets / Stock Market 2017 Jan 17, 2017 - 11:18 AM GMT

By: The_Gold_Report

Stock-Markets

Technical analyst Clive Maund forecasts a stock market "swoon" in light of the impending inauguration of Donald Trump.

The election of Donald Trump sparked a rally in the broad stock market, which has continued up to the present. According to the laws of reverse (inverse) logic that rule the markets, his inauguration as President is likely to trigger a swoon, and as we will shortly see, there are other compelling technical reasons for the market to drop back soon. It is worth noting that selling might start kicking in before the inauguration.


On the 1-year chart for the S&P500 index we can see that the breakout from the fine Dome pattern that developed during most of last year was caused by the election of Trump. Therefore, since the ensuing rally looks like the product of inflated and possibly unrealistic hopes regarding what Trump will go on to achieve, there is plenty of scope for disappointment, which psychologically is probably going to set in anyway once hopes of him becoming President become reality.

Since many regard him as crass and a buffoon, a reputation he has done little to diminish in recent days, you may wonder why he was granted the nomination for leader of the Republican party before the election, and why Bernie Sanders was "sold down the river." The reason appears to be that the Establishment wanted their stooge Hillary elected, and they calculated that if they presented an alternative who was so outlandish and "beyond the pale" as to be unelectable, Hillary would win. Unfortunately for them their little plan backfired, in large part because Trump's unguarded remarks and statements were a breath of fresh air after years of politicians not saying what they were thinking and trying to be politically correct all the time.

Returning to the chart, we see that the S&P500 kept on rising until it reached resistance at the top of the parallel channel shown that dates back to last spring, after which it has run off sideways in a narrow range, with downside risk growing.

The 4-year chart provides broader perspective. On this chart we can see that we are a long way from being in a bear market. Since the market has recently made new highs, moving averages are in bullish alignment and there is no overhanging supply. Last year's Dome pattern followed a much larger one, so that they look like two Russian dolls. The market would have to break down from the parallel channel shown before we can even start to think about the possibly of a bear market setting in.

The long-term 10-year chart actually looks bullish, as the market has advanced to clear new highs following the abort of a large potential top area, and appears to be in position to advance toward the upper boundary of the giant parallel channel shown, which would result in big gains from its current level, even though other factors are pointing to a drop over the short to medium term. A breakdown from this large channel would be a serious negative development, so we should on the lookout for this.

Various indicators are pointing to a market swoon over the short to medium term, with the Trump inauguration being the obvious catalyst, and it could start ahead of the inauguration. We will now look at them.

First is the Volatility Index or VIX, which is at a very low level, near to the levels seen in 2007 before the bear market started, meaning that market participants are feeling very laid back and complacent. Virtually no one expects the market to drop back much, which makes it that much more likely that it will.

You can see how low VIX is historically on its 15-year chart. . .

Next, the Smart / Dumb confidence index on which we see that Smart Money has made its way to the exits in recent weeks. This normally happens as a market continues higher, but on this occasion, it has happened as the market has moved sideways over the past month, which is rather unusual but certainly not positive. While it is hard to use this indicator in isolation for timing purposes, taken together with the other factors we are reviewing here, the case for a reversal soon looks quite solid.


Chart courtesy of sentimentrader.com

Finally, we see that short interest has plunged in the recent past, a sign that bears are "throwing in the towel." This is bearish because a shrunken short interest means that there is little short-covering fuel to power a rally.


Chart courtesy of sentimentrader.com

So, as we approach the inauguration of Trump, let's sum up the important factors we have observed here that point to a significant market drop soon. They are:

1. The market arriving at a trendline target early in December and then running off sideways in a narrow range

2. The VIX at a very low level showing extreme complacency

3. Smart Money confidence sinking to a very low level—they have booked a lot of profits over the past month or so

4. And finally, short interest shrinking to a very low level, showing that they have at last been beaten into submission, which usually happens at the worst possible time (for them).

Clive Maund has been president of www.clivemaund.com, a successful resource sector website, since its inception in 2003. He has 30 years' experience in technical analysis and has worked for banks, commodity brokers and stockbrokers in the City of London. He holds a Diploma in Technical Analysis from the UK Society of Technical Analysts.

Want to read more Gold Report articles like this? Sign up for our free e-newsletter, and you'll learn when new articles have been published. To see recent articles with industry analysts and commentators, visit our Streetwise Interviews page.

Disclosure:
1) Statements and opinions expressed are the opinions of Clive Maund and not of Streetwise Reports or its officers. Clive Maund is wholly responsible for the validity of the statements. Streetwise Reports was not involved in the content preparation. Clive Maund was not paid by Streetwise Reports LLC for this article. Streetwise Reports was not paid by the author to publish or syndicate this article.
2) This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.

Charts courtesy of Clive Maund


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in