The Trump Rally In U.S. Stocks Is Over!

Since the intra-day low of 2,084.59 on November 3rd, 2016 the S&P 500 Index has rallied 8.39% to Friday's record closing high at 2,259.53. While U.S. stock futures are higher tonight (Sunday, December 11th), by tomorrow's NY close (Monday, December 12th) I believe the tide will have turned and a major stock market correction will be underway.

As can be seen on the daily, weekly, and monthly charts below, the S&P has now advanced to its 3-standard deviation upper Bollinger Band, where mean-reversion corrections are almost inevitable.

I see this so-called "Trump Rally" as a terminal advance that will ultimately be viewed as THE TOP in the current 93-month old bull market that began in March 2009.

All the usual variables that contribute to bear markets will soon be in force here as follows:

1. The Federal Reserve is raising interest rates and is now in tightening mode (at least for the short term - "Don't fight the Fed!").

2. The U.S. economy is probably already in recession, but official declines in GDP, as reported by the Commerce Department, won't probably be reported until the first quarter of 2017. Corporate earnings will deteriorate rapidly and P/E ratios will soon revert to more realistic values from current historical highs. Corporate buy-back programs will quickly disappear and central bank buying of stocks on a global basis will evaporate.

3. President-elect Trump and his potential Administration will raise domestic and international levels of uncertainty in the financial markets as his policies generate confusion and controversy at almost every level of Government.

4. The latest CIA report on Russian interference in U.S. elections has the potential to be a "Black Swan" of unprecedented proportions for investors as the validity and legitimacy of a Trump Presidency is called into question.

5. Crude Oil prices have more than doubled since their lows as posted in early 2016. This latest production agreement among OPEC and Non-OPEC countries, as reported today, may be a short term positive for energy-related companies, but higher energy prices are ultimately a huge negative for the global economies in general.

In the interest of full disclosure, I am short the S&P 500 Index using the double-short SDS ETF as my favored investment choice for this bearish action.

S&P 500 Index Daily Chart with 3-Standard Deviation Bollinger Bands

S&P 500 Index Weekly Chart with 3-Standard Deviation Bollinger Bands

S&P 500 Index Monthly Chart with 3-Standard Deviation Bollinger Bands