Goal achieved! The hangover overwhelmingly bullish post-election campaign that the main Wall Street stock exchanges carried out this Wednesday – the bullfighting they showed themselves euphoric in the majority of the US selective indexes and led the S&P 500 to record its most bullish post-election day in history – has helped North American small and mid-cap companies catch up with the rest of the large US indices.
The Russell 2000, the selective that brings together this type of firms on the other side of the Atlantic, managed to rise one 7.8% and climb to the 2021 maximum zone, which the rest of the nation’s major indices had already reached in recent months. He lagging student of the class, he did his homework and joined the Nasdaq, the Dow Jones and the S&P 500, thus reflecting the North American market aces poker.
“US stocks rose due to the prospect of Republican policies favorable to growth,” many market analysts agree after Wednesday’s trading session. Now, the key to the market is to know how long the bullish movement can last and, above all, to know if it has the necessary consistency to be able to decisively beat – such as a monthly close – those 2021 highs.
“Once that objective has been achieved, it doesn’t seem bad to me that they choose to reduce their exposure to the stock market a little”points out in this sense Joan Cabrero, technical analyst and strategist of ecotrader. “If it continues to rise, they will be happy to continue holding, for example, 75% of their positions, while if the market corrects, they will have interesting ammunition to seek to buy. Christmas gifts”, explains.
And from the portal premium of elEconomista.es The latest rise in the Russell 2000 has been identified as “wonderful news for the coming months, which would continue to invite people to take advantage of cuts in the indices of 10% from their previous peak to buy.”
Furthermore, we must not forget that Trump’s election, despite having given hope to the market in the immediate short term, may have adverse effects on investors. bullfighting in the medium and long term, since, as La Financière de l’Échiquier (LFDE) recalls, “the consequences of its policy – if it is applied as it has announced, which is not certain – include unfavorable aspects for the equity market in some points”.
Operationally, the September minimums continue to be maintained as the yellow line which should be watched below in most global indices. “As long as these September lows hold, a drop could be considered a simple scare that would move the indices 10% away from their last peak, which would present an excellent medium-term purchasing opportunity with a much more attractive return/risk equation than the current one,” explains Cabrero, who urges in this case to look for true christmas giftswhich I will help you identify.
The dilemma in Europe
The operating strategy also invites a reduction in stock market exposure in Europe, but for different reasons. In the stock markets of the Old Continent, the first support levels to monitor have been lost in recent days. In fact, the draw The manifesto of bullish and bearish forces that were present in the Ibex 35 during the last 28 sessions was broken yesterday. The Spanish selective distanced itself from the trend of the rest of its continental counterparts and this Wednesday pierced the support that represented the lower part of the lateral movement in which the index was immersed in recent weeks.
“This is anything but bullish and warns us that the bears have taken control of the short-term situation in the Spanish stock market,” warns Cabrero while stating that “the threat now is that we could witness a larger consolidation.” that could look for in the worst case the 10,900/11,000 points“. Whether or not these levels are achieved will have a lot to do with the intermediate support of the 11,138 pointswhich are the September lows, and which now stand as one of the levels that can help stop an eventual fall.
The EuroStoxx 50, which already lost the support it presented in the 4,900/4,870 pointsis also open to a broader consolidation phase. In its case, the consolidation phase threatens to take the continental selective also to the September minimum zone in the 4,730 points or, in the worst case, the 4,675/4,700 points.
“I recommend waiting for the indices to approach the September lows before making new purchases, especially after the loss of key supports. An appropriate strategy would be to apply the “accordion” technique: slightly reduce exposure in the stock market to accumulate liquidity, which will allow them to take advantage of the purchasing opportunities that the market could offer in the coming weeks.”
Of course, the August lows are the ones that really need to be watched since it is where the red line is located, the perforation of which would imply something more serious, the time to retire to “winter quarters”, assuming that we are facing a scenario of “death” and not just “fright”.
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