As we have forecasted, The S&P 500, Nasdaq manage to set record highs this week with the Fed cutting rates and better job numbers.
The S&P 500 was up +1.5 %, the Nasdaq up +1.7% this week with positive factors like the Fed, earnings reports, etc.
Two major market events happened this week, one is the fed cutting the interest rate by 25 basis points to 1.50-1.75%. This is usually considered to be positive news for stock market traders, news about the interest rate going down means that the traders are looking for other investment alternatives finding the stock market as such they shift funds from the interest-bearing bonds to the stock market, with this buying pressure in the market it translates to a move up.
The second major event, in a different angle to forecast the market, is the technical front where we were waiting for a break of the 2030-$2050$ resistance in the S&P500, finally the market had a breakout this week and the resistance levels are broken setting the S&P500 on a new territory breaking the previous high, this is a major technical event in the market signaling that the previous sellers in the 2030$-2050$ area are not in power and the buyers taking over, three scenarios might be developing following that move:
- The market shoots up never looking back – this is the least likely scenario, we are not in an ideal economic environment where this may happen, volatility is high and earnings are low , we are at the end of an earning season reporting low numbers on the earnings front , the fact that the market stayed up and moving up is because this was expected by market analysts so there are no negative surprises, which , for now, is more important than the earning numbers themselves.
- The market folds back down, breaking the 2030$-2050$ to the downside sliding back to lower numbers, again we think that this is an event with low probability, all in all, the market has backing by natural to good news, earning reports, etc.. We don’t forecast major negative news that will take the market back to former low numbers.
- The market retests the 2030$-2050$, lingering there for a while and then gradually (with high volatility) make a move up – by our forecasting models this is the highest probability event, with over 50% probability to happen.
A normal move after an all-time high breakout is to retest the former resistance levels and in essence making it support, if that would be the case, then the move is confirmed and exposure to the bullish side should be increased on the expense of short side open positions.
To sum it up, we see a high volatility bullish market in the short to medium term, we believe that upside risk should gradually increase, cherry-picking the right assets, you may use our trading strategies to help with the stock picking and even receive alerts on a stock move in or out of our portfolios,
As always, trade safely,