The election of Donald Trump sparked a rally in the broad stockmarket which has continued up to the present, and according to the laws of reverse (inverse) logic that rule the markets, his inauguration as President is likely to trigger a swoon, and as we will shortly see, there are other compelling technical reasons for the market to drop back soon, and it is worth noting that selling might start kicking in before the inauguration.
On the 1-year chart for the S&P500 index we can see that the breakout from the fine Dome pattern that developed during most of last year was caused by the election of Trump, and therefore, since the ensuing rally looks like the product of inflated and possibly unrealistic hopes regarding what Trump will go on to achieve, there is plenty of scope for disappointment, which psychologically is probably going to set in anyway once hopes of him becoming President become reality. Since many regard him as crass and a buffoon, which reputation he has done little to diminish in recent days, you may wonder why he was granted the nomination for leader of the Republican party before the election, and Bernie Sanders was ‘sold down the river’. The reason appears to be that the Establishment wanted their stooge Hillary elected, and they calculated that if they presented an alternative who was so outlandish and ‘beyond the pale’ as to be unelectable, Hillary would win, but unfortunately for them their little plan backfired, in large part because Trump’s unguarded remarks and statements were a breath of fresh air after years of politicians not saying what they were thinking and trying to be politically correct all the time. Returning to the chart we see that the S&P500 kept on rising until it reached resistance at the top of the parallel channel shown that dates back to last Spring, after which it has run off sideways in a narrow range, with downside risk growing.
This post was published at Clive Maund on January 14, 2017.
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