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Trendsters, it’s that time again to dig into the real election predictor—and no, it’s not the polls. In today’s Traders on Trend, we’re diving into a far more reliable source: the S&P 500. With decades of perfect accuracy, it’s proven to be the crystal ball for presidential outcomes. As we break down the fascinating intersection of bulls, bears, and ballots, you’ll want to keep a close watch on how the markets are setting the stage for the upcoming elections.
And for those keeping an eye on the technicals, our Chart of the Day looks at the Dow Jones—despite some short-term bumps, the longer-term trend is firmly pointing towards 48,000. The data shows a structured path upward that’s been forming since the days of the housing crisis recovery, so there’s plenty to discuss as we analyze this bullish momentum. Also, don’t miss out on the latest Market Moving News and some fun trivia sprinkled throughout, because today’s newsletter is packed with insights that are too good to overlook. Let’s dive in and see what the markets are whispering about the future! |
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Automated Options Trades: Set, Forget, and…
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Stephen Ground isn’t a Wall Street pro, but he’s on a winning streak with Nathan Tucci’s Automated Options strategy. No need to know when to exit—trades close automatically. Six wins in a row? See how it’s done!
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From Early Rout to Late Rall
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A rollercoaster day on Wall Street saw an early sell-off turn into a late rally, driven by mixed signals from the August CPI report and upbeat tech sentiment.
The market initially stumbled as core inflation exceeded expectations, dimming hopes for aggressive Fed rate cuts. Rate-sensitive sectors like financials, staples, and healthcare felt the brunt of the disappointment. However, tech stocks, led by a semiconductor resurgence and positive AI demand commentary from Nvidia's CEO, staged a powerful comeback, flipping the script on the day's narrative. This tech-fueled rally underscores the market's ongoing search for leadership amidst the recent financial sector weakness. As Nathan Peterson from Schwab aptly observed, "The market was looking for leadership... and it looks like tech answered the call." Closing Bell: - S&P 500® index (SPX): A strong 1.0% gain to 5,554.13
- Dow Jones Industrial Average® (DJI): A modest 0.3% rise to 40,861.71
- Nasdaq Composite® (COMP): A robust 2.17% jump to 17,395.53
- 10-year Treasury note yield (TNX): A slight uptick to 3.66%
- Cboe Volatility Index® (VIX): A calming dip to 17.7
What's Next? - Keep an eye on tech stocks as they could continue to lead the charge if positive sentiment persists.
- Watch for any further Fed commentary or economic data that could shift rate cut expectations.
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Consider diversifying your portfolio with exposure to both growth and value sectors to navigate potential market swings.
Strategy tip: Watch for further strength in semiconductors and growth sectors. A pullback in rate-sensitive sectors could open opportunities, but the key lies in Fed messaging next week. |
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Inflation's Got a New Dance Partner, and It's Not the Fed
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Remember that time inflation was doing the tango with the Fed, and everyone was waiting for the music to stop? Well, it seems like inflation's found a new dance partner: housing prices.
Those stubborn housing costs just won't quit, keeping the core CPI hotter than a summer day in Arizona. It's like they're doing the salsa while the Fed's trying to slow things down with a waltz. So, what's an investor to do when inflation's got two left feet?
Maybe it's time to diversify your portfolio like a seasoned dancer, adding some moves that can handle a bit of heat. Think real estate investment trusts (REITs) or even homebuilder stocks, if you're feeling bold. After all, if you can't beat 'em, join 'em, right? |
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Dow's Steady March Toward 48,000 – Bullish Momentum Holds Strong |
It’s safe to say the Dow Jones isn’t letting a little volatility derail its long-term plans. After hitting an all-time high on August 30, the index is taking a well-timed breather, but the bigger picture remains as bullish as ever. The 1W MA50 (weekly 50-day moving average) continues to act as a sturdy support, and as long as that holds, the upward trend stays intact. What’s happening now? The short-term dips we’re seeing are a natural part of the Channel Up pattern the Dow has been following for over a decade. Just like in past cycles—whether it was post-2009 or post-COVID—the index is riding a well-defined path upward. Previous cycles saw rises of 70-75%, and this one looks to be on the same track, with 48,000 in its sights.
If you’re wondering whether this bull still has legs, look no further than the RSI fractals, which have cooled off just as the Channel Up started forming. This means we’re still in the middle of the cycle, and as long as the 1W MA50 holds, the Dow’s march toward 48,000 seems inevitable. Keep an eye on those support levels—there’s plenty of room to run. |
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Sam Altman’s Secret Investment: Bigger Than OpenAI? |
Billionaire Sam Altman is backing a lesser-known company that could outshine OpenAI. With ties to the US Military and a boost from a Trump-era law, this could be one of the biggest tech stories yet! Discover the full story in our report!
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Bulls, Bears, and Ballots: Wall Street’s Election Prediction Power
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Polls may dominate the headlines, but if history has taught us anything, the stock market might be a far more reliable predictor of presidential outcomes. Since 1984, the S&P 500’s performance between August and October has correctly forecasted every U.S. presidential election. When the market rises, the incumbent party has always won. If it declines, the challenger takes the prize.
Right now, national polls show Vice President Harris with a slight edge over former President Trump, but the stock market may have the final word. Why does the market have such predictive power? According to analysts at Comerica Bank, it’s all about economic sentiment. A rising market reflects confidence in the current administration’s handling of the economy, while a decline signals dissatisfaction and a desire for change. While a strong stock market has been a key factor for incumbents, it’s not foolproof. Years like 1976 and 1980 saw the market rise, yet inflation crushed the incumbents' chances.
There’s also the Misery Index to consider—a measure combining inflation and unemployment to gauge how much economic pain voters are feeling. The index has accurately predicted elections since 1980. Currently sitting at 6.73%, it’s improved from last year’s highs but still poses risks to the Democrats, especially with a rise in unemployment last month. The markets are watching—and so should we. |
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Stocks Surge While Fed Rate Cut Expectations Shift
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Wednesday brought a mix of market movements, with some companies rising on positive news while others took a hit. Novartis (NVS) dropped 1.5% after Bank of America downgraded the stock, citing slower growth prospects for the remainder of 2024. In contrast, Starbucks (SBUX) rallied 5%, as the new CEO announced plans to improve in-store experiences. Dave & Buster’s (PLAY) also jumped over 4.5% after beating earnings expectations.
However, the biggest winner of the day was Nvidia (NVDA), which surged more than 8% after CEO Jensen Huang shared a strong outlook on AI hardware demand at a Goldman Sachs event. This optimism spread to the entire semiconductor sector, lifting the PHLX Semiconductor Index (SOX) by nearly 5%. On the technical front, the S&P 500 (SPX) closed above its 50-day moving average of 5,500 after briefly testing its 100-day moving average earlier in the day. Meanwhile, the SOX bounced back above its 200-day moving average, signaling a strong recovery for the sector. The bond market saw action as well, with a $39 billion 10-year Treasury auction attracting solid demand. Yields eased slightly after hitting morning highs following the latest CPI report, which showed inflation largely in line with expectations.
Looking ahead, the Federal Reserve is expected to announce a 25-basis-point rate cut next week. However, analysts note that further cuts could be in store before year-end, with a focus on upcoming data like the Producer Price Index (PPI) and jobless claims reports. |
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MARKET MUSINGS & TIME CAPSULE |
Random Musings The stock market as an election crystal ball? Sure, why not. It has a better track record than most pollsters. Maybe politicians should take more cues from the S&P 500. Inflation’s real impact? It’s not just the prices rising—it’s the market’s patience shrinking. Just ask tech stocks that turned CPI-driven dips into Nvidia-led rallies.
Semiconductors saving the day? Once again, it’s the chips that are keeping the broader market afloat. AI might be the buzzword, but it’s clear the real magic is in the silicon.
The Misery Index sounds gloomy, but its predictive power is impressive. If it rises, the incumbent party’s days in power may be numbered. It’s like the economic weathervane for politics.
Dow 48,000: Is it ambitious? Sure. But when history repeats itself, it’s hard to argue with the trend lines. Maybe we should start planning the celebratory confetti. On this day in history, September 12 September 12, 1992: NASA launches the Space Shuttle Endeavour on its second mission. In finance terms, think of it as one of the many attempts to get markets “back into orbit” after turbulence.
September 12, 1940: The Lascaux Cave Paintings were discovered in France. Not exactly the beginning of technical analysis, but a historic moment for interpreting complex visuals, nonetheless!
September 12, 2005: Hong Kong Disneyland opens. An interesting reminder that global investments can bring surprising returns—even when wrapped in a cartoon mouse.
September 12, 1953: John F. Kennedy marries Jacqueline Bouvier. Their influence would later play a role in shaping the political landscape, but even back then, markets were eyeing their impact on the economy.
September 12, 1919: Adolf Hitler joins the German Workers' Party, marking the start of one of history’s darkest chapters. A reminder that political movements can have seismic effects on global economies. |
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As we wrap up today's newsletter, let’s leave you with a thought that feels especially relevant given all the talk about the stock market predicting elections and shaping economic sentiment.
Here’s a quote from David Tepper, the founder of Appaloosa Management:
"The markets are all about psychology. You have to figure out where everyone else is and go the other way."
It’s a perfect reminder for today’s theme. While election polls can drive headlines, market behavior often reveals deeper insights. And when the S&P 500 has a track record as accurate as it does with predicting elections, it might just be the best psychological barometer out there. Whether it’s inflation numbers, tech stock rallies, or the Misery Index, the lesson is clear: sometimes, following the crowd leads to missing the bigger picture. So, as we continue tracking the Dow toward its potential 48,000 target and watch the political and economic landscape unfold, don’t be afraid to look at things from a different angle. After all, that's where the real opportunities lie.
Here’s to smart moves and sharper insights—until next time, Trendsters! |
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