Last week we saw the stunning upset by Trump in the US election. As we mentioned, this could be a time when news trumps TA, so keep that in mind. Currently we are still in this 3 month range. We better chances to break out with a 223 target. However, we have a huge gap that will likely be filled eventually. Since we have two opposite scenarios, that makes this week very important. If we see follow through this week, chances of hitting the target will go way up. If we fall or fill the gap, we back to bouncing around in the range.
Last week every one thought a Trump win would cause the market to go into free fall. We expected a similar scenario, which did occur briefly overnight. We also mentioned that it would eventually be a great buy. The market realized the positives of a Trump presidency very quickly and surged the rest of the week. The surge was lead unsurprisingly by the industrial sector.
We saw big inflows after the election. There is a good amount of money now on the sidelines that will rush back into the market if we continue to rise.
As we have mentioned, long term yields on bonds have begun to act differently than in recent years. This could be an issue if yields keep on quickly rising. We started to see this last week as long term yields surged following the election. This will move into focus as we move closer to the next FED meeting. Current odds of a rate hike are at 83%.
We saw about a 10 point drop in the last few weeks. Bulls still have a weak buy the dip card. This means there is a slightly better, chance that bulls will buy this pullback. We already saw the break of 210 back into the 2 year range and it looks like the Bulls are in the process of buying the dip which could lead to a new high.
Long-Term Market Outlook (Updated 9/5/16).
This week is full of data and Fed speakers. All this will play into the rate hike discussion at the December meeting.