Trading Secrets, Weekly Market Outlook

S&P 500; US Indexes Fundamental Forecast – February 1, 2017

The major U.S. indexes closed lower on Tuesday as investors continued to react to the latest policies from the Trump Administration. Although we’ve seen volatility the past few days, the indexes still managed to post solid gains for the month. Investors were also expressing caution ahead of a slew of earnings reports.

In the cash market, the benchmark S&P 500 Index closed at 2278.87, down 2.03 or -0.09%. The blue chip Dow Jones Industrial Average finished below 20,000 for a second day at 19864.09, down 107.04 or -0.54%. The tech-based NASDAQ Composite ended the session at 5612.88, down 0.83 or -0.01%.

Trump created volatility in the markets on Tuesday when he made comments about speeding up FDA approval. Although the broad market is worried about his policies especially the immigration issue, the biotechs benefited from his mention of the FDA.

The response helped drive up the iShares NASDAQ Biotechnology ETF (IBB). It gained about 2.8 percent, helping to erase earlier losses in the NASDAQ Composite.

Sp-500-old-1The Dow Jones Industrial Average was under pressure most of the session as well as the S&P 500 Index. Banking stocks led the Dow lower while weaker industrials hurt the S&P 500 Index.


Investors have been surprised lately by the number of Trump executive orders. They had been reacting to and waiting for more information on his plans for improving the U.S. infrastructure, cutting taxes and relaxing regulations. While growing impatient, they have decided to pare positions. So far the sell-off has been orderly. There have been few signs of shorting pressure. Most of the selling has been related to profit-taking.

One concern for investors should be the low VIX. The lower the volatility index, the more complacent investors are. Often, this indicates that traders should be ready for a volatility spike.

On the bullish side, although we have seen sharp intraday breaks, the closes near the highs of the day suggest that investors are buying the dips.

The markets could be underpinned early on Wednesday because of buying ahead of the FOMC monetary policy statement at 1400 GMT. Additionally, the markets are expected to be supported by the earnings report from Apple that was released after the close.

Apple reported quarterly earnings and revenue that easily beat analysts’ expectations, but gave further guidance on the lower end of expectations.