S&P 500; US Indexes Fundamental Forecast – January 6, 2017

The major U.S. stock indexes closed mixed on Thursday as investors expressed concern over Trump’s ability to run the government. Although it’s not showing up in any numbers or reports, it’s starting to seem like negatively is building in the markets. Well, maybe not negativity, but I just can’t recall seeing a bullish headline this week.

Trump’s tweeting on key policy issues is starting to get to me. Some of the things he feels he can condense into 140 characters amazes me because, in my opinion, they are major issues. I’m not trying to be political, just stating as an analyst and trader that I would like to see some meat behind the issues. Every day, it seems, an idea is just floated out there ….let’s mention the overhaul of the North American Free Trade Agreement, let’s bring up the wall along the U.S. – Mexico border, let’s call out companies for sending jobs out of the U.S. and into other countries, let’s talk about repealing Obamacare.

We’ll we can talk about these things, but I don’t know if there is a plan in place for any of these ideas. So I don’t really know where investors will put money. I know where they have placed a few bets because I saw the sectors that drew the most attention right after he was elected. I just don’t know when the next stream of trillions of dollars on the sidelines is going to come into the markets and where it is going to go. I think the major players want to know also. And until they get some evidence, I don’t think they are going to be willing to chase the market higher.

In the cash markets on Thursday, the Dow Jones Industrial Average closed at 19899.29, down 42.87 or -0.22%. The benchmark S&P 500 ended the session at 2269.00, down 1.75 or -0.08% and the tech-based NASDAQ Composite finished higher at 5489.63, up 12.63 or +0.23%.

Forecast

The rise in gold and the Japanese Yen and the market’s inability to sustain a solid rally this week is a concern for me. These could be early indications that investors are hedging their bets against an early stock market rally this year. Does it mean that stocks are getting ready to roll over to the downside into a value area before moving higher? I think we are getting close to that point. Perhaps today’s U.S. Non-Farm Payrolls report will take care of that.

Investors placed bullish bets on lower taxes, more fiscal spending and looser regulations, but we’re not going to see any of those things for a long time so investors will be looking for something positive to hang their hats on in the meantime.

I’m looking for the market to tread water until earnings season starts on January 15. Because of the uncertainty surrounding the three major expectations, earnings better come in much better than expected or we could get a major correction going into Trump’s inauguration on January 20.