Can Technical Support Hold Now That Election Euphoria Is Over?
The post-election celebration ran into several roadblocks last week. Now the question is whether the uptrend can continue.
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Several issues combined to cause concern on Wall Street last week. The first was increased hawkishness from Jerome Powell and the Federal Reserve. Powell stated that due to economic strength, there was no rush to cut rates. In addition, both CPI and PPI hinted at sticky inflation. This has caused expectations for rate cuts in 2025 to decline, but there is still a significant likelihood of a quarter-point cut at the next meeting in December.
Concerns about some of President-Elect Trump's cabinet also caused market pressure. Robert Kennedy, nominated to be head of Health and Human Services, helped to cause the worst action in biotechnology IBB stocks since the pandemic selloff in March 2020. Vaccine stocks were particularly weak, while many other sector names suffered from confusion about how Kennedy might deal with the FDA.
Cabinet appointments will continue to be an issue this week as speculation intensifies over the Secretary of the Treasury. Elon Musk stated that he is hoping for someone who favors a "nontraditional" approach, and several new candidates are emerging this weekend. The market and Bitcoin will react when this decision is made.
Two key stocks are making big moves on Monday morning. Tesla TSLA is sharply higher on reports that the Trump administration will make a framework for fully self-driving vehicles a priority. Meanwhile, Nvidia NVDA is trading down on reports that its Blackwell chip is facing delays again due to overheating of servers. Nvidia reports earnings on Wednesday night.
Bulls are hopeful that positive seasonality and continued optimism about Trump's economic policies will provide market support. Mike Wilson of Morgan Stanley MS, who was bearish for over a year, is now a market bull. He sees U.S. equities benefiting from improved economic growth and further Fed interest-rate cuts in 2025. He predicts the S&P 500 will end next year, rising around 11% from Friday's close.
Goldman Sachs GS is also making an interesting call and predicts that gold will hit $3,000 per ounce in 2025 on central bank buying and Fed interest rate cuts.
The immediate issue for the market is whether it can find support after five straight lower closes for the Nasdaq 100 QQQ and a sharp drop for the Russell 2000 IWM into the post-earnings gap. There isn't much support on the charts right now, and there is a high level of emotion due to the unfolding Trump policies.
My main focus continues to be on stock picking. I'm looking for a continuation of the Bitcoin theme and view the sharp drop in biotechnology as an opportunity. Price action and chart development are the key issues.
At the time of publication, Rev Shark was long NVDA.
