The rally in stocks from short covering is coming to an end as evidenced by the falling Twiggs Money Flow on all the major indices. I wrote about the Trump short covering rally here. I said a week ago that when we see a negative divergence between the Twiggs Money Flow and the major indices, that would mark the end of the short covering rally a.k.a the Trump Rally.
Atlanta Fed’s GDPNow indicator cut its forecast for Q4 growth from 3.6% to 2.4%. The outlook matches the Fed’s latest release of the Beige Book, which found 7 Fed districts reported modest or moderate economic growth, down from 11 districts last month.
Gregory Mannarino agrees with my assessment that this Trump Rally was primarily the result of short covering. Check out this video commentary Gregory Mannarino did today:
Now that we have the market distortion of the US Presidential Election behind us, we need to see at what level the market retraces. The retracement level is going to be key.
The most bullish scenario is if the yellow support line holds at 2193. If that level is broken, then we have 2175 as support which is still very bullish because it’s above the 38.2% Fibonacci retracement level.
If the 38.2% retracement level of 2164 is broke, then we a convergence of supports at the 50% retracement level of around 2150.