By Simon Maierhofer
Sony Pictures/Everett Collection
There's been plenty of post-election coverage, so we'll skip that subject and focus on pure and simple stock-market indicators and their message for this post-election market.
According to the media, polls and pundits, Trump wasn't “'supposed” to win. He did. According the media, the stock market was “supposed” to crash in the unlikely event of a Trump win. It didn't.
Trump's win surprised American. Will the stock market also surprise America?
Back to basics
In “uncertain” times such as these, it's often best to get back to the basics and ignore the noisemakers duped by the election and market reaction (fool me once, shame on you; fool me twice, shame on me).
Based on a composite of indicators (various types of technical analysis, investor sentiment, money flow, seasonality), the Aug. 28 Profit Radar Report published the forward projection shown below.
At the time, the S&P 500 /zigman2/quotes/210599714/realtime SPX -1.18% traded near 2,180 (within points of its all-time high set four days early), but suffered from numerous bearish divergences. Based on our composite of indicators, we anticipated a decline to either the 2,140 or 2,080 range (green boxes) followed by a sustainable rally to new all-time highs (and beyond).
The Oct. 23 Profit Radar Report added that: " There needs to be a drop deep enough to flush out weak hands and build the foundation for a sustainable rally ."
The S&P 500 drop to 2,083 and the S&P 500 futures drop to 2,029 certainly flushed out many weak hands. S&P futures soared as much as 150 points from Tuesday night's low.
Do longer-term indicators still agree with the Aug. 28 projection?
Seasonality: Bullish into early 2017.
Short-term investor sentiment: Reached mildly pessimistic extremes last week.
Longer-term investor sentiment: Neutral. Investors tend to be notably bullish near major market tops. This, at the time, controversial column showed more than two years ago why sentiment will drive stocks higher.
Longer-term money flow: Bullish. A detailed money flow (market breadth) study conducted in February showed a historically bullish development (study is available here ).
Short-term money flow: Not yet bullish. Needs to improve.
The weight of evidence points toward further gains in the months to come. However, short-term the S&P 500 needs to overcome the “breadth hurdle” to unlock further gains.
Additional short-term indicators designed to help navigate the coming days/weeks are discussed here .