Since the election, we have had a great Trump Bump. It seems, for the time being, that the steam engine is starting to run out of steam. Yesterday, the S&P 500 (^GSPC, SPY) closed below its 50-day moving average for the first time since the election. The S&P, which previously had been soaring to new highs almost daily since its close on Nov 8 at 2139, thereafter gained more than 12% into March 1 to finish at an all-time high of 2400.98.
Trump Train stalling
Yesterday, things started to stall. The S&P finished the day down -0.4% while the Nasdaq Composite (^IXIC, QQQ) slipped -0.5%. Last year’s red-hot Russell 2000 (^RUT, IWM) slid -1.3%. In a healthy market, these major stock indexes should be trading above their 50- and 200-day moving average and not below.
Unfortunately, the Trump Train has run into some major obstacles on the track. Traders, who normally go right to the business sections of their papers or blogs, are now more concerned about developments coming out of North Korea, Syria and Russia. In North Korea, it was reported that China had moved troops to the Korean border. Reuters reported ships loaded with coal from North Korea may have been turned around and sent back to North Korea.
And then there’s Russia
Half a world away, the meeting between Russian President Vladimir Putin and US Secretary of State Rex Tillerson was reported to be a little rocky. Throw in the uncertainty over the upcoming elections in Europe, and we have a recipe for skepticism. Indeed, if we take a look at the S&P chart you will see that the index has made no major advances since March 21.
Today, earnings season began in full force, as JPMorgan (JPM), Citigroup (C), and Wells Fargo (WFC) all reported. JPMorgan and Citigroup beat, but Wells Fargo fell short of expectations on revenue. We expected to see great numbers out of this list, with the financial sector up more than 10%. However, we don’t expect to see too much of a move in the markets overall until next week. US markets are all closed tomorrow for Good Friday, and most traders will be hesitant to take on any major positions before the three-day weekend.
The best advice is to stay on the side lines until this uncertainty calms down. Keep an eye on your “stop orders” with respect to your winners and adjust as needed.