05 Feb Markets Await President Trump’s State of the Union
Today is a slow day for scheduled economic news, so the technical factors will once again drive the direction of the markets. This puts stocks in a strong position, for the moment. The concern is that stocks are now right up against their 200-day moving average. A break above this would not only be terrible for mortgage interest rates, but it would also represent another trend reversal. It has been many years since stocks have spent a considerable amount of time beneath this critical moving average. I believe it is time for stocks to soften. If they do manage to break above this level, I don’t think it will last too long. As more and more people are realizing the risks of a pending recession, investors, employers and consumers will all begin to take steps to prepare.
Tonight’s State of the Union could add volatility in the market’s tomorrow. Depending upon the direction President Trump goes, we could see either celebration or panic heading into tomorrow’s trading. It seems at this point that the President will not seek emergency funding for the boarder wall, which could mean that he will also give up the battle over the Federal government shutdown looking later this month. It seems that democrats remain unwilling to sign off on funding the wall, so another shutdown could just further hurt President Trump. This would be viewed as good news for the stock market, as a federal shutdown is not a good thing for the U.S. economy.
Given the risks of stocks advancing above their 200-day moving average, we will maintain a locking bias. We will assess the situation once again tomorrow and see how tonight’s speech will impact the near-term markets.