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'Melt-Up' Alert: Stock Market Will Continue to Surge Through Year's End

'Melt-Up' Alert: Stock Market Will Continue to Surge Through Year's End

By    |   Thursday, 02 November 2017 07:53 AM

Stock market technicians reportedly predict the current bull run will easily charge into the new year.

“The rule of thumb is May to October is the weakest time, while November to April is the strongest. A Santa rally often occurs at the end of the year, and can be a positive streak of several percent,” CNBC reported.

The S&P 500 is up 15 percent year to date. When it's been that strong in years past, further gains have followed with an average 4.9 percent added in the final two months of the year. CNBC reported.

To be sure, in the past 20 years, the S&P 500 has risen an average gain of 1.4 percent in November 75 percent of the time, and gained another 1.4 percent in December, also 75 percent of the time, CNBC reported, citing analytics firm Kensho.

"Really what it is, is strength against strength,” Strategas technical analyst Todd Sohn told CNBC.

“If you use a baseball analogy. If you put up 10 runs through six or seven innings, you're probably putting up a lot more in the last couple," he said. "The seasonal backdrop is pointing to stronger-than-average returns, and you just have to be involved here for the next two months," he said.

Ari Wald, technical strategist at Oppenheimer, told CNBC that the stock market gains are not a hazardous "melt-up" but more of a steady healthy bull market that is marching higher, based on his indicators.

"Seasonals are supportive here and especially so when you're trending higher. Not only are November and December two of the best-performing months of the year, they're even stronger when you're starting the month above the 200-day moving average," Wald said.

"In general, we're just getting into the best six months of the year. ... For January specifically, is a month of the year when strength tends to beget strength," he said.

However, other experts do see some economic storm clouds on the financial horizion. They are warning savvy investors to be careful and weigh all the risk factors.

"President Trump has said that it would be easy to achieve around 4 percent trend growth in the States. U.S. growth has come in at around 2.25 percent so far during his presidency," Newsmax Finance Insider Hans Parisis explains.

"To achieve 4 percent trend growth in the absence of mass emigration, which seems unlikely, a productivity miracle would be necessary. Signs of a productivity miracle have been lacking," Parisis wrote in a recent blog.

Meanwhile, Jerome Powell, said to be Trump’s pick to be the next Federal Reserve chairman, is set to take the reins of the world’s most important central bank when the U.S. economy is rolling along at a pace he’ll be under pressure to sustain.

Growth is accelerating, inflation is tame and unemployment is the lowest in 16 years. Such a backdrop should initially enable a new Fed chairman to keep gradually raising interest rates from historic lows with the aim of stretching out what is already the third-longest U.S. upswing, Bloomberg reported.

But expansions don’t die of old age. Rather, they typically are brought down by the bursting of asset bubbles, shocks like natural disasters or political upheaval, or errors by central banks.

Faster rate hikes could cool the stock market but risk holding inflation below the central bank’s target, possibly tipping the economy into a recession. Tightening too slowly could stoke asset values even further, creating trouble down the road. Powell, and Trump by association, will own the outcome.

Powell has the added dilemma that his Fed would confront any slump in growth with little in its policy arsenal. There is barely room to cut rates deeply, and the backup plan -- quantitative easing -- is now the subject of Republican lawmaker ire.

“Powell has been dealt some cards in this poker game that aren’t helpful for carrying out monetary policy,” said Torsten Slok, chief international economist at Deutsche Bank AG in New York. “The world economy has never been in better shape, but it is a very unthankful job to be a central banker these days.”

(Newsmax wire services contributed to this report).

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Stock market technicians reportedly predict the current bull run will easily charge into the new year.
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Thursday, 02 November 2017 07:53 AM
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