S&P 500; US Indexes Fundamental Forecast – December 7, 2016

U.S. equities rallied on Tuesday with the Dow closing a new all-time high as Trump’s post-election rally continued. Volume was below average and the ranges tight, however, as investors had little reaction to fresh U.S. economic data while waiting for Thursday’s European Central Bank meeting and next week’s U.S. Federal Reserve interest rate announcement.

In the cash market, the benchmark S&P 500 Index closed at 2212.23, up 7.52 or +0.34%. The blue chip Dow Jones Industrial Average finished at 19251.78, up 35.54 or +0.18%. The tech-laden NASDAQ Composite ended the session at 5333.52, up 24.63 or 0.46%. The popular December E-mini S&P 500 Index closed at 2210.00, up 5.75 or +0.26%.

Forecast

I’ve been looking for a correction from current levels because I like to buy value, but we seem to be running out of time for that. This being said, it looks as if we may just continue higher into the end of the year.

The short-term momentum remains positive for the S&P Index as if last week’s brief sell-off was just enough to alleviate some of the buying pressure. Sentiment is a little overly bullish, but I don’t think it will cause a short-term change in trend. Furthermore, investors seem to be coming in on any weakness. Therefore, they may not allow this market to make a normal correction.

Weaker oil prices could have a negative impact on prices especially in the energy-weighted S&P Index. However, there always seems to be another sector available to offset the losses. Yesterday, it was the Telecommunications sector which rallied 1.5 percent.

Traders could react to the ECB meeting if there are surprises. The Fed meeting could drag down the market too, but with 95% of investors expecting a rate hike and the markets trading near all-time highs, this news has likely been priced into the market.

Although I think a correction is necessary to take the markets to new levels in sling-shot fashion, I’m beginning to think we’ll just go into a “Santa Claus” rally without a noticeable break taking place.