Seeing as this is my first Friday rant of the New Year, it’s important to remind you that historically the first five days of market action are indicative of the direction we’ll take for the next 12 months. And already things have been somewhat positive, with the Dow up about 330 points at the close on Thursday and the Nasdaq also getting a nice boost.
Yet shortly after the close, a U.S. drone strike in Baghdad killed Iranian General Qasem Soleimani, who many claim to be the No. 1 bad guy and taker of U.S. lives in recent times. This is victory for us in the short-term, but there will surely be some sort of major retaliation in the coming days or weeks.
Stocks were down over 300 points at worst early on Friday morning, largely erasing yesterday’s strong gains. More important, the markets are backing off of my key resistance point just over 28,000 on the Dow. Breaking above yesterday’s high of 28,873 will be bullish near-term, but breaking below 26,300 will be more bearish.
We’ll have to see how things continue to progress. And remember, one thing that’s a better indicator than the first five days? The first full month.
Of course, 2020 is expected to be an anomaly, as I’ve been writing about for quite some time, so it’ll be tough to apply the conventional wisdom of market trends to what happens over the next few weeks.
Remember, we’re still deep into this megaphone pattern, and a downturn could also be coming that would scare people before the 2020 peak. That, along with the tumultuous political landscape at the moment – to say nothing of what happened in Baghdad overnight – will only further muddy the waters. And that’s to say nothing of the pressures Trump will put on the Fed in order to keep the economy humming as he moves toward his re-election.
To put it lightly, we’re in for quite a wild one. I have more in this week’s Friday Rant.