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- Is Trump-Win Good for Stock Market?
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Can Trading of News and Hype Be Profitable?
Today we will discuss the hype and reality of Trump-Win rally in the context of if and how news and hype should or should not be traded.
Many pundits expect that Trump will be economy, stock market, and crypto-friendly, including the expectation of establishing a crypto reserve.
But there are headwinds.
As we discussed a couple of months ago, the stock market typically does not perform well in the first year of the presidential cycle.
Crypto and the stock market already had a powerful run. The Stock market is at historic overvaluation, and even moderate hiccups in the economy can cause a significant correction. Not to mention cycles, technical analysis, and similar factors that suggest a weak year ahead.
All this raises the question of whether and which news is tradable. The Trump-Win financial market hopes are just the most recent example.
How many times did you see stocks sell on great news?
Have you heard of “Buy the Rumor, Sell the News? Institutions use news events to unload the inventory onto retail.
Another great example that I discussed was the FED’s rate cuts.
Remember that just before the September rate cut, everyone expected that yield would go down in line with the rate cuts. The opposite happened; rates went down into the FED’s meeting and relentlessly increased after—a typical buy-the-rumor, sell-the-news case.
Actually, in the newsletter just before the FED’s rate cut in September, I twisted this by saying, “Is this going to sell the rumor/yields, buy the news/yields?”
The takeaway is to be careful trading the news and recommendations from the pundits on financial networks. Rely on your own objective technical and/or fundamental analysis. Do not buy hype; sell it.
Remember the September China market example? In the newsletter, I identified a short-term trading opportunity just before the rally started.
Coincidentally, with strong “Buy China” recommendations by David Tepper and Goldman Sachs, I suggested taking profits. That was based on my longer-term cycle analysis of FXI that I posted several months ago, which suggested a decline in the China market from late 2024 into 2026.
There were rumors that Tepper and Goldman were unloading Chinese shares.
always read our disclaimers
Is Trump-Win Rally Alive & Well? A Technical Primer
Fast-forward two months and one day from the 6 Nov Trump-win Gap & Go rally, and the SPX closed below the level of 6 Nov on 7 Jan.
Was this another “buy the rumor, sell the news”? There has been buying since August and distribution in November, December, and early January.
Note the brown wedge.
SPX just quickly popped above its upper trendline and then dropped below it to never exceed it again.
On 18 Dec, it dropped below the lower trendline, a bearish development.
Since then, SPX danced below and above that lower trendline and 10D EMA and 50 DMA and was rejected by it on Monday.
Bears are noticing that and a potential Head & Sholders (H&S) bearish pattern. However, the H&S pattern will not be effective until the price breaks below the neckline.
Bulls can argue that the pattern since December top is a corrective consolidation.
Indeed, as I discussed in Premium newsletters, a couple of Elliott wave patterns could flag the weakness of the last several weeks as a correction before another push higher. Plus, there is support for higher from the nominal 80D and 20W cycles.
One possibility is the green ending diagonal in my artistic presentation on the chart, or if you wish, my Elliott Wave vision of one possibility.
This ending diagonal can crawl higher to above the Dec high while staying below the lower trendline of the brown wedge.
Whether this scenario will play out is to be seen. I will track plausible options almost daily in the Premium newsletters.
To continue reading about Market Summary, US Markets, Elliott Wave and Technical analysis of US Markets, volatility, as well as commodities, bonds, forex, currencies or crypto, upgrade to Premium Pro. . .
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