S&P 500; US Indexes Fundamental Forecast – January 16, 2017

Stocks were mixed on Friday as investors reacted positively to stronger quarterly earnings from U.S. banks and a couple of better-than expected economic data. The S&P 500 Index and the NASDAQ Composite posted gains, but the Dow Jones Industrial Average continued to tread water.

In the cash market, the benchmark S&P 500 Index closed at 2274.64, up $4.20 or +0.18%. The blue chip Dow Jones Industrial Average finished at 19885.73, down 5.27 or -0.03% and the tech-based NASDAQ Composite ended the session at 5572.31, up 24.82 or +0.45%.

Forecast

Although the NASDAQ posted several new all-time highs last week, the S&P 500 Index and the Dow seemed to lag a bit. Both, however, remain within striking distance of their all-time highs. The markets haven’t been signaling an imminent change in trend, but they do seem to be taking a breather ahead of Trump’s inauguration speech.

Although some journalists made a big deal out of Trump’s ill-conceived press conference last week, where he was scolded for not mentioning any details of his economic plans, the price action late in the week suggested that investors have already moved on.

We could see sideways movement on Monday because of the bank holiday, or we could see volatility spikes in reaction to fresh earnings news. Today is really a toss-up.

Bearish traders may decide to shed positions ahead of Trump’s inauguration speech. However, bullish traders may decide to increase positions because the odds are that Mr. Trump is going to try to fire up investors in his speech. In other words, in this speech, he may reveal more details of his economic plans and maybe even more ideas.

We may trade sideways this week, but after his inauguration speech, I expect stocks to rally.