The US election is now behind us and with the unexpected Trump victory, it is time to assess how the markets view the new presidency and what they expect going forward. At the same time, earnings season is almost over and 76% of all companies beat their earnings estimates and 56% surpassed revenue projections.
The markets are currently focusing on Trump’s plans to increase US infrastructure spending which boosted stock index futures, the Dollar, Copper and the DOW advanced to historic highs. From a macro perspective, the economy seems to be in good shape and if the trust in the Trump presidency keeps up, it’s likely to see price continue its rally. The following is Optimus Futures, LLC analysis and opinion.
From a technical perspective, we can see how the S&P 500 E-Mini found immediate resistance at the 2100 level after price shot up from the initial election overreaction panic. Obviously, the question is whether bulls can find enough momentum to break above the 2100 or if the range keeps holding.
After the initial shock and knee-jerk rally, Gold sold off as it became obvious that a Trump presidency might not be that bad after all. Gold is running into support just above the psychological 1200 level. However, price looks weak and we could see a continuation of the sell-off.
It all depends on how stocks respond this coming week and the high correlation between the S&P and Gold is very clear at the moment.
The Dollar soared after the Trump victory and although many people expect a correction next week, it’s likely to be a shallow one if markets don’t change their minds. One reason for the advance in the Dollar could be Trump’s spending plans but next week, markets will focus on Yellen once again and the potential FED rate hike in December could keep the Dollar going.
Technically, the Dollar is running into a double top at 99.05 but the Friday close suggests a lot of bullishness and, thus, makes a break likely. The next upside target is at the major round number at 100 and such levels can act as psychological magnets.
The OPEC reported an increase in production during October which weighed heavily on Crude Oil prices and suggests an even bigger surplus next year. There is still a lot of debating going on whether a cut can actually be implemented but it seems that an agreement will be difficult to reach. The next meeting is held in Vienna on November 30th.
Technically, Crude traded back into the support at 43 and after an initial bounce, it seems like there is enough bearish momentum building up to lead Crude prices lower. The next support level can be found at 42 and it’s the origin of the latest rally during mid-July.
Copper was on track for its biggest rally in over 35 years which was caused by the hopes of increased infrastructure spending with the new Trump presidency. At the same time, China steel surged and although Chinese Trade Balance data came in a little worse than expected, it was still up compared to previous numbers.
With that, Copper seems to have broken out of its past year’s range. After the huge rally, a pullback can be expected next week, but the global economy and the outlook seem positive for Copper going forward.
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