Stocks turn up and shake last week’s volatility, but political turmoil still informs activity

May 22, 2017
By Vlad Karpel

Major U.S indexes saw broad gains today as investors look for corrections, following a series of shocking reports about the Trump administration’s handling of an FBI investigation into Russian ties to the Trump campaign team. Defense stocks, in particular, climbed high today following the announcement of a major arms deal struck between the U.S and Saudi Arabia. Going forward, investors will be looking closely at political news and proceedings in Washington in order to determine whether or not last week’s sell-off was a hiccup or a tipping point.

The Trump rally was intrinsically tied to expectations that his administration would be able to push a pro-growth, pro-business agenda with a Republican controlled House and Senate. Deregulation, tax reform and a massive infrastructure spending bill were significant legislative items that will be more difficult to pass with bipartisan support amidsts a political maelstrom and GOP in-fighting.

The DJIA is currently up 0.42%, or 87.26 points, at 20,875.36. The Nasdaq-100 is up 0.59% at 6,112.98 and the S&P 500 is currently trading at 2,388.13 which is up 0.36% from the open.

Using the ^GSPC symbol to analyze the S&P 500, our 10-day prediction window shows  overall negative directions. Today’s positive vector figure of +0.10% moves to -0.74% in the next three sessions. Today’s support and resistance is 2,360.45 (± 4.37) and 2,391.06 (± 4.43), respectively. The predicted close today is 2,389.12.   

 

Oil

Crude oil prices are pushing higher today as investors anticipate a Thursday OPEC meeting in Vienna that will focus on global production cuts. The consensus amongst observers is that the production cut deal, set to expire in June, will be extended. The details of the duration and intensity of this new extension will be of interest to market participants. Incessant U.S domestic shale production is an immediate concern to this dynamic, as it has served to counter production cuts and take advantage of higher prices created by those cuts.  West Texas Intermediate for June delivery is currently priced at $50.90 per barrel, up 0.70% from the open.

Looking at USO, a crude oil tracker, our 10-day prediction model shows overall positive movement. The fund is currently trading at $10.52, which is up 0.38% from the open. Today’s prediction sees support at $10.46 (± 0.10) and resistance at $10.61 (± 0.10). The predicted close for today is $10.58. Vector figures show +0.92% for today, moving to +3.09% within four sessions. All vector figures are based on today’s market conditions.  

 

Gold

The price for June gold is currently up 0.52% at $1,260.10 a troy ounce. Although political upset in Washington is driving investment into the safe-haven asset, the expectation of a rate hike next month will likely impact gold negatively. One factor helping to support gold prices currently is a weakened U.S dollar. This is attributed to uncertainty stemming from concerning reports that are damaging to the Trump administration’s credibility.

Using SPDR GOLD TRUST (GLD) as a tracker in our Stock Forecast Tool, the 10-day prediction window consistent downward movement. The gold proxy is currently trading at $119.89, up 0.41% from the open. Today’s predicted low is $117.99 (± 0.30) and the predicted high is $119.44 (± 0.30). The predicted close today is $118.95.  

 

Treasuries

Treasury yields are climbing today as investors look toward a potential rate hike next month from the Federal Reserve. Investors will also be paying close attention to the unfolding stories in Washington that have been swirling around the Trump White House. If investigations and controversy hold up the pro-growth agenda, the expectation of future inflation will wane and drive investment into bonds.  The yield on the 10-year Treasury note is currently up 0.43% at 2.24%. Bond prices and yields are inversely related to one another.

Using the iShares 20+ Year Treasury Bond ETF (TLT) as a proxy for bond prices in our Stock Forecast Tool, we see solid positive signals in our 10-day prediction window. Relative to current conditions, we see vector figures moving from +0.38% today to +0.66% in three trading sessions.  The ETF is currently priced at $123.30- down 0.33% from the open. The predicted close today is $124.06 with a low and high of $123.16 (± 0.28) and $124.82 (± 0.29), respectively.  

 

Volatility

The CBOE Volatility Index (VIX) is currently down 4.98% at 11.44, following a return to relative stability following last week’s politically charged sell-off . The predicted close today is 12.76 with a positive vector of +3.54%. Today’s predicted lows and highs are 12.09 (± 0.35) and 13.72 (± 0.39), respectively.

 

Other News

Ford Motor Co. (F) has announced plans to replace its CEO, Mark Fields, with another Ford insider named Jim Hackett. Hackett is known for his work within Ford’s autonomous vehicle division. Ford’s shares are up 1.52% today at $11.01.


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