Markets calibrate to Fed results, analysts conflicted over prospects of a Santa rally.

Stock futures are looking up this morning following last week’s FOMC conclusions, and looking toward one last speech from Janet Yellen. DJIA futures climbed 25 points to 19,819, S&P 500 futures jumped 2.2 points to 2,257.50, and Nasdaq-100 futures saw a gain of 4.75 points to 4,920.50. This upturn follows a slightly weaker trading session on Friday which most analysts linked to the latest episode in the maritime theatre of tension between the U.S and China.

A Chinese warship had seized an underwater drone belonging to the U.S Navy, which was ostensibly operating as part of a scientific study. Incidents like these can make investors wary of potential impacts on routine trade, logistics and international business relationships. The event served as another preview of discourse between China and incoming U.S President-elect Donald Trump, whose Twitter comments were dismissed by China’s Foreign Ministry.

The Dow is currently trading at 19,901.24, up 58.31 points, or 0.29%. The Nasdaq-100 is currently seeing a 0.67% gain today, climbing 36.75 points to 5473.53. The S&P 500 is trading at 2265.76, up 7.69 points, or 0.34%. Bullish confidence is abound, and many signs point to a Christmas “Santa” rally in the near future. There are many, however, who assert that the rally has already happened or that the markets are exhausted and poised for a pullback. Animal spirits, the Trump Bump, euphoria, or whichever label used to explain these conditions has some calling out displaced optimism.

Using the ^GSPC symbol to analyze the S&P 500, our prediction model shows incremental positive movements. Vector values gradually climb from today’s reading of +0.17% toward ~1% within 6 trading sessions.  The predicted close today is 2267.89, with predicted support and resistance at 2258.07 (± 4.16) and 2278.48 (± 4.20), respectively.

Upcoming Events & Reports

Janet Yellen will be speaking at the University of Baltimore today at 1:30 pm Eastern Time. The title of the speech is “The State of the Labor Market” and will be the last of the Fed’s speaking engagements before the Holiday break.

Oil

Oil futures continues to skirt $52 per barrel, currently trading at $51.78 which is down 0.12, or 0.23%. There is still some market skepticism around the reality of meeting a newly OPEC-defined production ceiling of 32.5 million barrels per day, and investors are likely going to wait to see how the arrangement between OPEC and non-OPEC countries shakes out.

Looking at USO, a crude oil tracker, our 10-day prediction model shows some expected volatility in trading with alternating blocks of positive and negative vectors. The fund is currently down 0.26% at 11.52. Today’s prediction sees support at 11.55 (± 0.10) and resistance at 11.74 (± 0.10). The predicted close for today is 11.70.

Gold

Gold futures are currently up $5.10, or 0.45% at $1142.50. Routine end-of-year adjustments coupled with voices of concern around potential index-rally reversals are likely driving the gains.  

Using SPDR GOLD TRUST (GLD) as a tracker in our Stock Forecast Tool, we see consistent positive movement with a slight reversal at the end of the 10-day prediction window. It is currently trading at 108.68 which is up 0.08, or 0.58%. Today’s predicted low is 107.99 (± 0.43) and the predicted high is 109.72 (± 0.43). The predicted close today is 108.47. 

Treasuries

We may be seeing what market strategists commonly refer to as “short covering”: a sharp reversal caused by a piece of data or commentary amidsts widespread investor consensus. In this case, the extreme post-election selloff and a Trump-euphoria hangover would be the contributors. We can expect to see this market environment experience volatility as there is uncertainty around Trump’s fiscal policies, infrastructure plans, and subsequent measures from the Fed. Using the iShares 20+ Year Treasury Bond ETF (TLT) in our Stock Forecast Tool, we see this volatility in the 10-day prediction window.

TLT, an ETF which tracks 20+ year bond returns, is currently up 0.53 points, or 1.17% at 118.51. The predicted close today is 116.91 with a low and high of 115.73 (± 0.54) and 117.14 (± 0.54), respectively. Vector movements are volatile with low-momentum oscillations. This particular ETF is going to be highly sensitive to any news or commentary offering contextual value to the situation.

Volatility

The CBOE Volatility Index (VIX), otherwise known as the Fear Index, is down 2.38% at 11.91 with a consistent upticks predicted. Our 10-day model shows vector values reaching toward 14%, relative to today’s conditions. The predicted close today is 12.99. Today’s predicted lows and highs are 12.20 (± 0.24) and 13.43 (± 0.26), respectively.  Predicted 10-day figures show support contained between ~12 and ~14. Predicted resistance stays between ~13 and ~15.

Other news

Iranian officials and Boeing executives are confident in maintaining a recent purchasing agreement for 80 jetliners- a $16.5 billion deal- which has become an object of scorn for President-elect Donald Trump. In the event that the Trump administration or U.S congress attempts to tank the deal, Iran would move to recover any lost payments. 
Standard Industries Inc. is set to acquire Braas Monier Building Group SA, a leading German roof maker, for $1.15 billion. Standard Industries also owns GAF Materials Corp., North America’s largest roof maker, and recently acquired Braas Monier’s Danish rival Icopal.