The Trump Speculation Game: Pharma, banking sectors gain. Tech faces uncertainty.

After dealing with initial shocks and portfolio adjustments last week, we’re seeing market gains across various indexes. The Dow surged to record-breaking gains, the highest weekly marks since 2011. Looking to the attractive prospects of rising rates, J.P Morgan Chase and Goldman Sachs Group were at the forefront of this surge. DIJA is currently trading at 18856.50, down from a morning high of 18925.84.

The S&P 500’s jump broke the weekly record since 2014. Currently trading at 2162.97, the index rose just below 0.1%. Again, finance and banking lead the charge with a 2% increase in that sector. The Nasdaq Composite has been stabilized around 5,240. This is due to the saturation of tech stock, which offset the gains made by its financial sector.

The scarcity of information around Trump’s transition to power, and subsequent cabinet appointments, is forcing markets to make obtuse judgements. Within the coming weeks, we’ll see more granular adjustments reflecting trade, foreign policy, healthcare and domestic projects. Recently announced appointments see Reince Priebus as Chief of Staff and Steve Bannon, of Brietbart News, as Chief Strategist. This is intended to display an internal balance between Bannon’s injection of populist nationalism and necessary political pragmatism, of which Priebus is a symbol for.

Technology Selloff

Tech stocks, including the FANG group (Facebook, Apple, Netflix & Google), are seeing sweeping selloffs as the global business models they rely on may be impacted during the Trump presidency. Technology Select Sector SPDR Fund (XLK) is down 1.46% at $46.05 currently. This tech ETF includes global tech names like Apple (AAPL), Microsoft (MSFT), Alphabet Inc. (GOOG, GOOGL), Facebook (FB) and IBM (IBM). There is much uncertainty surrounding immigration, global trade agreements and tax policies around repatriating overseas profits. The former items of that list will see scrutiny from the Trump administration, while the latter may actually benefit tech giants like Apple. Regardless, there is going to be some degree of political tension from Silicon Valley leaders, which tend to lean left and largely denounce Trump’s agenda.

Currencies

The dollar was continuing to perform strong against a collection of currencies including the yen, euro and Canadian dollar on Monday. The ICE Dollar index jumped on Friday, from 99.055 to 99.805. It is continuing that rally today, currently trading at 100.17- its highest since Nov. 2015. These changes seem to reflect a potential stimulus program tied to Trump’s pledge toward infrastructure projects.

We can look toward a weaker euro in the short-term, resulting from general uncertainty stemming from Trump’s emboldening effect on far-right parties across Europe. Many speculate a round of alliance-making between these movements in Europe, the U.K and the U.S. Look for commentary on this emerging political story in European countries with pending elections, such as France and Holland.  

The Mexican peso seems to have stagnated, with the US Dollar currently exchanging at 20.8807. This will most likely remain consistent barring major policy previews from the nascent Trump cabinet.

Gold

Gold is still riding the post-election sell-off, currently trading at $1216.40, down 0.6% from the open. However, we may see a rebound as investors will look to gold as a hedge against a number of factors. These include potential inflation due a spend-heavy Trump fiscal policy, a trade war with China, and general geopolitical uncertainty. Using SPDR GOLD TRUST (GLD) as a tracker in our Stock Forecast Tool, we see a positive vector in the 10-day outlook. It is currently trading at 116.21 with today’s support at 116.99 and resistance at 119.16. The standard deviation today is 0.42- Low and 0.43- High. Our models show 10-day resistance capping above 120.92 and support holding between 117 and 119.

Volatility

The CBOE Volatility Index (VIX) is still in its post-election dip today at 15.44. The projected intraday support is 13.26 with a standard deviation of 0.27. Projected intraday resistance is at 15.67 with a standard deviation of 0.32. Our 10-day prediction shows a downward vector getting heavy around Nov. 18 at almost 7%, then rebounding after Nov. 23 and reaching above 7% with a positive vector.  Resistance is predicted to edge slightly above 18 after a week from today, and support ranging from 13 to 15.  

Oil

Crude oil is trading at $42.28 currently, down 2.6% from its open. This is largely due to a general consensus that US domestic oil production will spike under Trump, regulation will ease, and his attitude toward global climate-change initiatives is less than favorable.

Looking at USO, a crude oil tracker, our 10-day prediction model shows overall decline. The fund is trading at 9.6567 with intraday support at 9.77 and resistance at 9.95, both with a standard deviation of 0.05. The predicted Highs stay between 9.5 and 9.95, while Lows decline from 9.77 to 9.23. The projected downward vector would progressively move from ~1% to ~4% by Nov. 24.

In other news

Fed chairwoman Janet Yellen will be testifying to Congress later this week. She will discuss the current economic outlook and may offer more context to Fed thinking pending the December FOMC meeting. Attributed to US political changes, yields on Treasury bonds are still rallying. For the first time in almost a year, the 2-year yield rose above 1%. 10-year yields breached 2% today and the 30-year is at 2.96%, down from an early morning high of 3.07%. This is driven by expectations of slashed taxes, increased infrastructure spending, increased inflation and hiked interest rates in December.