Amid the chaos of a new regime led by Donald Trump stocks continued to gain traction as bold yields moved in tandem higher. The Russell 2000 lead the charge higher reflecting the perception of strong future domestic U.S. growth. The Russell surged to a fresh all-time high rising 2.6%, dragging the Nasdaq composite to a new all-time high. The dollar continued to gain traction as U.S. yields outpaced other sovereign yields paving the way for a higher greenback.
The markets will continue to monitor Mr. Trump's cabinet choices and what they might mean for his policies, but there are still two months to go before he assumes office, leaving the markets to speculate on his agenda and what they will mean for global flows. Meanwhile, politics will remain in the crosshairs as old and new clash. Italy is slated for a December 4 referendum. The Netherlands holds general elections in March, with France's presidential primaries in April and May, while German voters go to the polls in September.
The U.S. markets will remain volatile near term amid ongoing position squaring, while economist try to guess where we go from here. U.S. equities arel benefiting significantly from President-elect Trump promises of tax cuts and infrastructure building, which have sent the Dow surging to an 8.3% year-to-date growth rate. Better yet, the Russell 2000 small cap index is up 15.8% YTD, and has climbed for 11 straight sessions, its longest streak since 2003. On the other hand, the Trump train has run over bond bulls as the threat of rising inflation, and the all but certain December Fed rate hike have boosted the 10-year yield a near unprecedented 58 bps in just two weeks, from 1.77% on November 4 to 2.35% on November 18.
A Fed rate hike on December 14 is about a sure a bet as there is. Strong data, and even more powerful Fedspeak have supported expectations for a 25 basis points increase next month. Indeed, Fed chair Yellen led the way last week when she reiterated that the case for a tightening was strengthening, and added that a hike could be seen relatively soon.
EUR/USD[i] tumbled last week dropping to a fresh 11-month low and poised to test the November 2015 lows at 1.0506. Resistance is seen near former support now resistance at 1.0805, and then the 10-week moving average at 1.1019. Momentum has turned negative as the MACD (moving average convergence divergence) index generated a sell signal. This occurs as the spread (the 12-week moving average minus the 26-week moving average) crosses below the 9-week moving average of the spread.
The GBP/USD[i] reversed its gains, moving lower as the dollar gain traction. Resistance is seen near the 10-week moving average at 1.25315. Support on the currency pair is seen near the October lows at 1.1943. Momentum has turned positive as the MACD (moving average convergence divergence) index generated a buy signal. This occurs as the spread (the 12-week moving average minus the 26-week moving average) crosses above the 9-week moving average of the spread.
Gold
Gold prices[i] tumbled hitting a fresh low for the move as the dollar gain traction paving the way for lower prices. Resistance on the yellow metal is seen near former support at 1,250 and then the 10-week moving average at 1,274. Support is seen near the May lows at 1,199. Momentum is negative as the MACD (moving average convergence divergence) index prints in the red with a downward sloping trajectory which points to lower prices for the yellow metal.
US Tech 100
The Nasdaq 100[i] moved higher during the week by nearly 1.2% but most of the action was in the Russell 2000 which soared to a fresh all-time high. Resistance is seen near the October highs at 4,910, while support is seen near the 50-day moving average at 4,528. Momentum has turned negative as the MACD (moving average convergence divergence) index generated a sell signal. This occurs as the spread (the 12-week moving average minus the 26-week moving average) crosses below the 9-week moving average of the spread.
Apple
Apple shares (NASDAQ:AAPL) rebounded climbing 1.5% during the past week. Resistance is seen near the October highs at 117. Support is seen near the 50-day moving average at 102.44. Momentum has turned negative as the MACD (moving average convergence divergence) index generated a sell signal. This occurs as the spread (the 12-week moving average minus the 26-week moving average) crosses below the 9-week moving average of the spread.
FB/USD
Facebook (NASDAQ:FB) shares moved lower as traders focused on the financial sector and industrials as technology stocks lagged. Support on the social network giant is seen near the 50-week moving average at 115.75. Momentum has turned negative as the MACD (moving average convergence divergence) index generated a sell signal. This occurs as the spread (the 12-week moving average minus the 26-week moving average) crosses below the 9-week moving average of the spread.
