Thursday, December 29, 2016

Market Indexes at Critical Levels

The Market Trend Model (data sheet) moved to a mixed bias on Thursday just one day before trading closes for 2016. The "fast and furious" election rally seems to have lost its momentum and profit takers are doing just that, banking profits. Any further selling will move the Market Trend Model to a negative bias.

The Nasdaq (weekly chart) and the S&P 500 (weekly chartare consolidating their recent gains as volume has diminished due to the holiday season. Similarly, the Russell 2000 (weekly chart) and the Nasdaq-100 (weekly chart) show similar consolidation patterns.

When Reagan was elected the stock market saw an initial pop and then a larger decline. According to former Dallas Federal Reserve President Richard Fisher, "Ronald Reagan gets elected.The market, S&P 500, up 8.5 percent until he gets inaugurated.Next year, down 20 percent."

Perhaps tax selling begins in January or perhaps the market gives one more push into new highs. Whether the election rally continues into the new year remains to be seen. At least for now, it appears that investors may have one foot out the door...just in case.