If you want to know which direction the stock market is going, just look at it. It will tell you.
That's why the best-known mantra about market direction is: The trend is your friend.
If the trend is up, you buy more stocks. If the trend is down, you take cover or sell stocks.
Since 2009, the trend has clearly been up, up, and away. In fact, since the bull broke free from the bear's claws in March 2009, the S&P 500 is up 200%.
And since the election of Donald Trump, the grade of the uptrend has gotten steeper with markets setting new all-time higher highs.
Another Wall Street mantra is: The trend is your friend until the end when it bends.
And that's the problem right now.
Investors looking at the long, long uptrend are scared the election of Donald Trump as America's 45th president precipitated a final push higher and that now we're facing the bend that ends up breaking the back of this old bull.
I laid out my bullish case and why markets can double in a few years here on Wednesday.
The Biggest Obstacles in Our Way Right Now
The two hurdles right in front of us are the inauguration of President-elect Donald Trump and the confirmation process his cabinet nominees will be subject to.
Inauguration Day is Friday, Jan. 20, 2017. Donald Trump takes the oath of office at 12 p.m. EST at the U.S. Capitol, officially marking the peaceful transfer of power at noon from the outgoing to the incoming elected president of the United States of America.
Given the demonstrations, protests, and downright anger over the election results, there's a possibility the Inauguration could be marred by protesters on site, and possibly protests around the country. If protests turn violent or disruptive enough, they could frighten investors over the weekend into taking profits on Monday. That's a stretch, which is why it's only a hurdle to the bull's march higher.
The other market hurdle right in front of us is the whole process of confirmation hearings and the gauntlet the soon-to-be president's cabinet nominees will have to traverse.
The last push higher for stocks, since the election, has been about optimism and expectations that President-elect Trump's proposed policies (such as tax cuts, fiscal stimulus, and deregulation) will generate corporate profits, cash, and buybacks in a banking environment less impeded by stifling regulations.
Markets could be prone to profit-taking if Mr. Trump's candidates are rejected, or if the whole process gets drawn out so he isn't able to implement policies markets are counting on, or if he's impeded from governing because his cabinet is in limbo. While that would be unprecedented, given the bitterness Democrats feel about losing the election, they could take a stand for their constituents and wreak havoc on the…
About the Author
Shah Gilani is the Event Trading Specialist for Money Map Press. In Zenith Trading Circle Shah reveals the worst companies in the markets - right from his coveted Bankruptcy Almanac - and how readers can trade them over and over again for huge gains. He also writes our most talked-about publication, Wall Street Insights & Indictments, where he reveals how Wall Street's high-stakes game is really played.