Stock Market Expert Predicts a Downward Trend for the Coming Week
In the coming week, the stock market is expected to experience volatility due to the inauguration of a new US president and the Federal Reserve's announcement on interest rates. BTIG strategist Jonathan Krinsky predicts a "sell the news" moment in the stock market, with potential buying opportunities for investors.
Krinsky's prediction is based on technical indicators signaling overbought conditions and unusual market behavior. The Nasdaq-100 has not closed below its 20-day moving average for 60 consecutive sessions, a streak last seen right before the dot-com bubble burst in 1999, suggesting potential market turbulence ahead. Additionally, technical momentum indicators like the monthly Relative Strength Index (RSI) are in overbought territory, and the MACD (Moving Average Convergence Divergence) indicator is flattening, indicating waning upward momentum and increasing risk of a pullback.
This critical week also includes major Q2 earnings reports from the tech, finance, and crypto sectors, alongside the Federal Reserve’s last meeting before September, adding economic and political uncertainty that could expose market vulnerabilities.
If Krinsky's prediction materializes, he advises investors to prepare for possible turbulence and consider taking profits or hedging their positions. The indicators suggest limited upside without some form of consolidation or correction, implying that investors should have an exit or risk management plan ready to protect gains from recent rallies.
Historically, the first year of the four-year election cycle has been a period of strong market performance. Despite the potential for a short-term correction, investors should keep in mind that the stock market has a history of providing strong returns, even during times of political change.
Interestingly, if Kamala Harris becomes president, Krinsky expects a stronger correction due to potential investor disappointment. In 2022 and 2023, similar signals in the bond and foreign exchange markets preceded corrections of 11 and 19 percent, respectively.
In summary, investors should not despair in a situation of increased market volatility. Instead, they should be alert for potential buying opportunities during periods of market volatility, as the first year of the four-year election cycle has historically been a period of strong market performance. If a correction occurs, Krinsky advises investors to consider locking in gains, taking profits, and implementing hedges as the market appears primed for a short-term pullback or correction.
Investors may find it beneficial to assess the stock market during this critical week, given BTIG strategist Jonathan Krinsky's prediction of potential buying opportunities arising from a "sell the news" moment. The investing landscape could see turbulence due to factors such as the inauguration of a new US president, the Federal Reserve's announcement on interest rates, and Q2 earnings reports from various sectors.
