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Thoughts on 2019 (2)The S&P 500 Index ended virtually flat for the week at 2707.88, but still up 8.02% YTD. Once again, the Index failed to get through resistance at the 200 day moving average. Until the 200 DMA is breached, IMO money will remain on the sidelines. For a more extensive review of last week, see Urban Carmel's take: https://fat-pitch.blogspot.com/2019/02/weekly-market-summary.html When I'm thinking about what the stock market is likely to do in the future, I like to combine my analysis of future political events with technical analysis (i.e. analysis of chart patterns by top-notch technicians like Urban Carmel). In the next few weeks, IMO there are two political events that could move the S&P 500 Index up or down: a potential government shutdown and the imposition of higher tarriffs due to a breakdown in the trade negotiations between the US and China. IMO it is likely that the Congressional negotiators will reach some sort of deal either at Camp David this weekend or during next week. Even if that doesn't happen, I doubt that Trump would shut down the government again. All he has to do is direct the US military to lay down extensive barbed wire fields on the border's weak spots. When it becomes clear that the US government is not going to be shut down, I would expect the S&P 500 Index to stabilize from any pullback next week. Next week our negotiating team is headed to China for further trade negotiations. Although the news that Trump had cancelled his meeting with the Chinese leader started the pullback on Thursday, Trump will be in the neighborhood at the end of February after meeting with the North Korean leader in Vietnam. Let's face it: both sides need a deal. I wouldn't be surprised if there were a breakthrough in negotiations this week, leading to a meeting with Trump and Xi Jinping at the end of February, during which Trump agrees to delay increasing the tariffs for a few months so that further negotiations can take place. Obviously, this news would catapult the S&P 500 Index through the 200 DMA up to 2800 and possibly higher. If I've correctly predicted the outcome of the two political events, then investors have this coming week to put money to work, after which IMO there will be no further entry points for a while. Notice that my thinking corresponds with Carmel's outlook using technical analysis as set forth in his blog. GLTA! Savannah |
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