Big Money Selling Into Q2 Earnings ?

Investor’s first read – Daily edge before the open
DJIA: 21,711

S&P 500: 2,477
Nasdaq  Comp.:6,422
Russell 2000: 1,442
Thursday, July 27, 2017   9:14 a.m.
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      The Fed Open Market Committee (FOMC) released the minutes of last month’s meeting yesterday.  As expected, it did not raise rates, but it did indicate it plans to begin winding down its $4.5 trillion balance sheet, compiled as a result of a massive stimulus program  to rescue the economy after its 2007 – 2009 meltdown.

        According to CNBC, the unwind may start as early as September and will  initially allow $10 billion  of its bond portfolio to  run off each month until its balance sheet reaches $2 trillion.
      The wind down has been widely anticipated and  should not disrupt the markets unless demand for bonds is insufficient to prevent a rise in interest rates.

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 The DJIA outperformed the S&P 500 , Nasdaq Comp., and Russell 2000 yesterday with a gain of 97 points, but actually would have been down 50 points without Boeings (BA) 20-point gain as a result of increased “guidance. The 30 Dow stock average can be distorted by  sizable moves in just one or a couple of its stocks, since it is a price-weighted average.
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     According to Investech.com, a 5% correction has occurred in each of the eight years of this bull market during the May to November period. It adds, a 5% correction occurs about every 7.2 months.

     A 5% correction from Dow 21,711 works out to a drop of  1,086 points to 20,625.  The same for the S&P 500 works out to a drop of  124 points taking the index down to 2,353, the May low for both.
TODAY
        Q2 earnings have been projected to jump sharply (see below), in fact, Factset believes its projections of +7.2% are on the low side.
      The S&P 500 price/earnings ratio (P/E) based on projected earnings a year from now is 17.8, well above the ten year average of 14.0.
       If a correction is in the wings, the BIG money will be selling into good earnings reports.  We won’t know that for a month.
       Like the pink rabbit, the market does not act like anything, including a Trump meltdown, can stop it.
        Good Q2 earnings on top of good Q1 earnings can give an investor reason to go all-in – Don’t.
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             While the Street has been betting on a massive stimulus, the healthcare quandary has delayed its progress. Passage would enable Congress to move on to tax reform and possibly a big spend on the military and infrastructure.  Obviously, continued delays would temper the Street’s enthusiasm, and force the market to find a comfort level at lower prices.

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SUPPORT “today”:DJIA:21,667;S&P 500:2,475; Nasdaq Comp.:6,420
RESISTANCE “today” DJIA:;S&P 500:;Nasdaq Comp.:

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CORPORATE EARNINGS
(updated June 14 , 2017)
Factset
      Q1 earnings increased  14.0%.  Q2 growth  is projected at +7.2%, Q3 at +6.4%, and Q4 at +11.7%. For 2017 as a whole growth is projected at a plus 9.3%.  Currently, the P/E on forward  earnings is 17.8 x. That compares with a 10-year average P/E of 14.0.
Note: These numbers change frequently. Factset.com is well worth a visit, it breaks its projections down by industry
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MY TECHNICAL ANALYSIS  of the 30 DJIA Companies
:  (UPDATED 7/14/17)
      On occasion, I technically analyze each of the 30 DJIA stocks  for a reasonable risk, a more extreme risk, and an upside potential over the near-term. I add the results of each, then divide by the new DJIA “divisor” (0.14602) to get the DJIA for those levels. This gives me an internal check on the DJIA itself, especially if certain higher priced stocks are distorting the averages.
      As of  June 15, 2017,  a reasonable risk is 21,207extreme risk is 20,026.Near-term upside potential is 21,701.
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POLITICAL/STOCK MARKET
NOTE: Due to the seriousness of political developments, I find it necessary to address the following issues, as I believe they will in time have a great impact to the stock market.
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“FIRE EVERYBODY” – White House Communications Director, Anthony Scaramucci has a solution for information “leaks” – “Fire everybody.”
       
For an administration that is grossly under-staffed, that just another example of a White House in disarray. I don’t see him lasting very long.
        OF SPECIAL NOTE:  On July 24, 1971, the Nixon White House formed  a small group that became known as the “plumbers,”  because they were charged with plugging “leaks” of sensitive information coming out of government agencies that were embarrassing to the Nixon administration.
       On June 17, 1972 five of the plumbers were arrested trying to bug the Democratic National Committee headquarters in the Watergate Building in Washington, DC.
      But it was the cover up, not the break-in that led to multiple attempts to circumvent justice that eventually forced the House Judiciary Committee to initiate impeachment proceedings on July 27, 1974, which resulted in the resignation of President Nixon on August 8, 1974.

      Is history repeating itself ?
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       In October 2016 it was reported that an email server inside the Trump Tower had communicated with  Alfa Group, a Russian bank. The Senate Judiciary Committee  has told Donald Trump, Jr. and Eric Trump, Executive Vice President of the Trump Organization, to turn over all communications with the bank.
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HEALTHCARE VOTE: Seems like momentum for a “skinny” bill is attracting interest. Unlike the House and Senate bills already introduced, it wouldn’t cut Medicaid. Beyond that, little is known.                      

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MANAFORT GETTING IMMUNITY ? I have always believer Paul Manafort knew everything anyone wanted to know about collusion by the Trump team and Russians, as well as where to look for financial interactions with Russian oligarchs and direct/indirect representatives of President Putin.   As of July 25, Manafort is “negotiating with the Senate Judiciary Committee for immunity to spill the beans.
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TRUMP looking for a “Get Out Of Jail Free Card if the Feds close in?”
    Why not, he dodged military service with 5 deferments  during the Vietnam era (1964 – 1970).
     Reportedly, he has asked advisers about his power to pardon family members and himself  relating to Mueller’s investigation.
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TRUMP SETTING STAGE TO FIRE Attorney General Jeff Sessions, Deputy Attorney General Rod Rosenstein  and Special Counsel Robert Mueller. 
      In an interview with the New York Times, Trump expressed displeasure with Sessions and Rosenstein.  His beef with Sessions is that he recused himself from overseeing the Russia investigation, saying if he knew that in  advance, he wouldn’t have hired him

      He blames Rosenstein for appointing Mueller, who he indirectly warns not to extend his investigation into Trump finances. One source says only Rosenstein would have to be fired, or agree to fire Mueller, before Mueller would be fired.  Trump fired FBI’s Comey, then boasted about it in person in the White House to Russian Foreign Minister, Sergey Lavrov and Russian Ambassador Sergey Kislak, referring to Comey as “crazy and a real nut job.”  STOP AND THINK OF THAT STATEMENT if you have doubts about Trump firing Mueller.  IMHO, collusion here is one problem, but I suspect this mess goes deeper into Trump family dealings and Trump must stop it there.
W HAT HAPPENS WHEN THE INVESTIGATION IS COMPLETED ? If the Special Counselor  concludes it is “necessary and appropriate” he is authorized to prosecute federal crimes arising out of the investigation, which he does after submitting a report to the attorney general explaining his reasons.

REASONS NEEDED TO FIRE MUELLER:  Misconduct,  dereliction of duty, incapacity, conflict of interest, good cause (??), violation of Department policies.
WOULD MUELLER BE REPLACED ? Unclear. If the Democrats controlled Congress they could appoint another Special Counselor
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  “Connect the Dots.” This investigation is open-ended
       Nigel Farage – President Trump- Jeffrey Sessions – Robert Mercer – Cambridge Analytics – Bannon- Carter Page – Kushner (Jared and Ivanka) – Eric Prince – Donald, Jr.  and Eric Trump – Wilbur Ross –  Michael Cohen – Ezra Cohen Watnick – Michael Flynn – JD Gordon  –  Christopher Steele – Michael Caputo -Breitbart News – Roger Stone – Julian Assange – Paul Manafort – Rick Gates – Jill Stein – Sam Clovis –  Kellyanne and George Conway –Dana Rohrabacher – Bill Browder – Peter W. Smith (deceased: suicide), Paul Behrends – Boris Epshteyn, Ike Kaveladze, and  Russia’s alfa Group – Felix Sater – Rob Goldstone – alfa Group – Emin Agalarov – Sergey Gorkov –  Sergey Kislyak, ambassador to the U.S., Natalia Veselnitskaya all connect directly or indirectly to the Trump/Russia investigation and some have a connection to Brexit, as well.
      According to the “Observer,” Mercer’s Cambridge Analytica was connected with Canada’s AggregateIQ through an intellectual property agreement and worked together on the Brexit referendum. Aggregate is also a data mining company. While Mercer was a big supporter of Trump, there is no known connection between AggregateIQ and Trump’s campaign staff.

       The Palmer Report.com  recently reported that Peter W. Smith (recent suicide) sought to collude with Russian hackers stealing emails from Trump’s opposition while claiming to be working with Michael Flynn.

      The Wall Street Journal  released two articles, one documenting Smith had some kind of recruiting connection with Steve Bannon and Kellyanne Conway. Unfortunately, Smith cannot be contacted to further confirm the story as he died of unknown causes shortly after his disclosure to the Journal.
            Additionally, IMHO, Vice President Mike Pence simply had to be aware of what was happening in the campaign, but is being shielded because he is the second in command if  President Trump is impeached and convicted  or forced to resign. Stephen Miller, Joseph E. Schmitz may be of interest to the FBI for information they possess relating to the FBI investigation.
      According to CNN Politics,  Marc Kasowitz has represented Trump for personal and business matters for years. Worth noting, Kasowitz is defending Russian bank, OJSC Sberbank in U.S. court, as well as a Russian billionaire, Oleg Deripaska, who has close ties with the Kremlin.      
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ROSENSTEIN and MUELLER OUT ?      Who Takes Over ?
       Will President Trump  fire special counsel Robert Mueller Donald Trump, Jr. to impede criminal charges against his son Donald Jr. and stall the investigation of he and his team ?
       As I understand it, he would first have to fire  Rod Rosenstein, Deputy Attorney General –
      
Obviously,  firing Mueller would smack of  “consciousness of guilt,” and could lead to impeachment proceedings by the House, and/or increase pressure for Trump to resign..

      With Rosenstein out of the way,  associate attorney general, Rachel Brand, would take over.  If she resigns, or is fired, Dana Boente, U.S. attorney general for the Eastern District of Virginia would take over.
       I believe this scandal reaches far beyond collusion with Russia to get Trump elected.
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On June 27, I added Jill Stein,Green Party
Presidential candidate to my “Connect the Dots” list (see below), questioning why she sat at the same dinner  table Dec. 15, 2016 with Vladimir Putin and Michel Flynn for the celebration of the 10th Anniversary of Russian Network TV (RT). Her answer to the press was, that it was a great opportunity to express foreign policy positions and get Russia’s reaction. She was running for president of the United States. I had no reason, still don’t, to believe she did anything wrong, but thought she would be a good source of input since she was there and had a chance to mix with Russians.
      Last week, the Senate Judiciary Committee requested all documents relating to the Trump, Jr. meeting with Russians at Trump Tower  June 3, 2016. Among others on the list was Jill Stein. Stein responded with a twitter rant, accusing the Committee of an “obvious smear.” The votes she garnered in Michigan, Wisconsin and Pennsylvania were enough to give the election to Trump, but the same holds true with the Johnson/Weld ticket.
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DISGRACE !   What an  utter disgrace that people who are sworn to serve the American people  jerk them around for seven years as they wage an ideological, senseless, and unhuman war against an effort to craft an answer for America’s biggest problem – healthcare, derisively named Obamacare. 

     SHAME ! . It is bad enough to be hobbled by a health problem, dealing with daily  pain and uncertainty about whether one can afford healthcare or that it will be there at all, then to find your Congress working against you.    

     To make matters worse, President Trump’s comment when his Senate failed to pass a replacement bill was, “We’ll let Obamacare fail and then the Democrats are going to come to us.”  This is the President of the United States plotting for the implosion  of the healthcare of tens of millions of Americans.  He wants them to lose their healthcare, to be thrown out in the street, so he can claim victory.   This is all about Him, and people support that.
      We will pay a dear price for electing him.
      The Freedom Caucus just keeps hitting new lows and ironically America keeps returning them to office.  Our biggest risk is not Russia,  Iran, or North Korea, it’s the Freedom caucus, Constitutional anarchists, who want to take the country down to zero and rebuild in their own image.  It’s the party of “NO !”  That’s not how our country was developed into a world leader.
BREAKING NEWS: On Wednesday, Trump told GOP senators to cancel recess scheduled to begin the third week of August and repeal and replace ACA. At a lunch with senators, Trump said he wanted a repeal and replace of the ACA, but at very least, a repeal.
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 ADDITIONS  to “Connect the Dots”
      I am adding two people to my “Connect the Dots,” (see below) – Boris Epshteyn to my “Connect the Dots” list (see below).  Boris left the Trump administration after his role as senior adviser to the Trump’s campaign, and later Assistant Communications Director  of Surrogate Operations for the Executive Office of the President.  Clearly he was in a position to know what was going on. Additionally Boris worked with the Russian government in 2013 to promote investment in Russia and reportedly has financial ties to the former Soviet Union. (more later).

       I am also adding: Ike Kaveladze, the eighth person at Junior’s meeting. He is a U.S. citizen who attended the meeting expecting to serve as  a translator for Natalia Veselnitskaya. He is a senior vice [president of Crocus Group, a real estate development company run by Aras Agalarov, a billionaire Russian oligarch. Ike studies at the Moscow Academy of Finance and got an MBA in the U.S.  at the University of New Haven, Conn.
       His attorney, Scott Balber,  says  Ike “never had any engagement with the Russian government in any capacity.”
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I don’t consider Donald Trump a Republican, or let’s say the kind that was able to go toe-to-toe with Democrats on issues but find middle ground then move on to the next issue deserving  attention. If he is a Christian, he clearly does not act like it – Let’s start with favoring the rich over the poor. How Christian is that ?  I doubt you’ll find reference to his  Narcissistic  personality (lies, ego, vanity, shamelessness, arrogance, abusive, vindictiveness, unyielding, boastful, feeling of superiority ) mentioned in the Sermon on the Mount.  So why do so many Christian leaders and followers support him ?  WHY ?   The question must be asked, would a person  like their husband,  father, uncle, brother, son, grandson to behave like Donald Trump, so why in the world would anyone other than an extremist Republican want him to be their president ?      …………………………………………………………………..

LAWYERING UP !  Everyone except the White House minions is lawyering up including to mention a few, V.P. Pence, Kushner, Stone, Manafort, Junior, and of course the big kahuna.
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GET THIS  ! Friday is wrote that the Senate’s revised healthcare bill won’t be scored by the CBO, instead it will be scored by Secretary of Health and Human Services, Tom Price, and declared in compliance with reconciliation rules by Republican Senate Budget Committee chair, Mike Enzi.    Correction: According to NBC News (7/14), this was “under consideration,” not decided on by Republicans and it is unclear  whether they would proceed, or whether Senator Enzi would go for it, since we have a CBO and budget process explicitly for the scoring process.
     
With Sen. John McCain’s surgery this weekend, the CBO is not expected  to release its score today, and may not have anyway since it now has to consider the  amendment by Sen. Ted Cruz, R.-Texas.      

      The CBO score could be the swing factor in whether the Senate got its 50 votes for approval, a tie with Vice President casting the 51st vote.
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Trump, Jr.’s blunder is looking more and more like a “somethingburger” than “nothingburger”  as facts surface !
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      Sunday’s breaking news about Donald Trump Jr.’s meeting at Trump Tower with a Russian lawyer, Natalia Veselnitskaya,  who reportedly was offering disparaging news about Hillary Clinton shortly after Trump’s nomination. The story has changed several times in the interim, each time getting significantly worse for Junior. This could get ugly, since it involves the son of a person running for president seeking hurtful information on the prime opponent from a country considered our adversary.  Also attending was Jared Kushner, Trump’s son-in-law and Paul Manafort, Nataliaa translator, Anatoli Samochornov, and Rinat Akhmetshin, a U.S. citizen formerly a Russian and  now a Russian/American lobbyist and . Regardless of what version of the story Trump Jr. tells next, Paul Manaford knows the truth about this issue and many others. Squeeze him past the ouch point, and he’ll tell all.
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     REMOVING TRUMP FROM  OFFICE

Can Section 4 of the 25th Amendment, U.S. Constitution – Remove Trump ?
      It’s a stretch. 
The key for his removal is ”that he is unable to discharge the powers and duties of his office.”  Section 4 mentions nothing  that he is unfit, delusional, unbalanced, crazy,  impulsive, irrational, impaired, sociopathic, psychopathic, narcissistic.
      That would be the threshold that would have to be crossed if Trump is removed from office via Section 4 of the 25th Amendment of the U.S. Constitution. There is no precedent

      It isn’t just Democrats, liberals, moderates and reasonable people who find Trump caustic, and dangerous, conservatives like George Will, David Brooks and Ross Douthart are also urging his removal.
      First, there are four ways to get rid of Trump – death, resignation, impeachment and Section 4 of the 25th Amendment.
      The procedure employing the 25th Amendment requires the Vice President and the majority of the cabinet of 15 (8) to vote to remove the president. They would submit their declaration in writing to the President pro tempore ( Sen. Orrin Hatch) and Speaker of the House (Paul Ryan) that the president is unable to discharge the powers and duties of his office, and the Vice President will immediately assume to office as acting president.
      However, the president may contend the move by submitting his own letter to the President pro tempore and Speaker of the House, that he believes he is capable of performing his duties, in which case he will resume the office of presidency.
       The Vice President and Cabinet members may then resubmit their declaration at which point Congress would vote within 48 hours if in session. If not, Congress  will act within 21 days where a two-thirds vote would be required to remove  him.  
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IMPEACHMENT
      A  Consult/Politico poll shows 43% of Americans want Congress to begin procedures for the impeachment of President Trump.

      The U.S. Constitution  enables Congress to remove a president for “treason, bribery, or other high crimes and misdemeanors.” Intitially, the House votes on one or more articles of impeachment- if a majority vote is reached, he is impeached.  BUT, impeachment only means indictment. The Senate holds a trial overseen by the chief justice and Supreme Court. A group of House members serve as prosecutors and the Senate as jurors. If two-thirds of the senators find the president guilty, he is removed from office and the vice president takes over.
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TRUMP TO PUT US  ON  A WAR FOOTING !
       I retained this one in the queue, due to a recent Trump tweet that help from China “has not worked.”
       On January 12, I noted:
       “I am sure of one thing, the United States will be on a war footing in the spring of 2018. Two things, it will juice the economy….may push war hawks to act on military expenditures; two, ensure support for the mid-term elections.
(Investor’s first read.com.)
       In April, Trump told the Financial Times, “If China is not going to solve North Korea, we will.” In June, he said, “While I greatly appreciate the efforts of President Xi & China to help with North Korea, it has not worked out.”
       This looks like a countdown to military action, or brinkmanship so dire that North Korea comes to the table. 
        Strategically, Trump would want to put the country on a war footing  with North Korea closer to the election in 2018, but if the Russia investigation gets too hot, he may want to begin the process earlier as a distraction.
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“Connect the Dots.” This investigation is open-ended
       Nigel Farage – President Trump- Jeffrey Sessions – Robert Mercer – Cambridge Analytics – Bannon- Carter Page – Kushner (Jared and Ivanka) – Eric Prince – Donald, Jr.  and Eric Trump – Wilbur Ross –  Michael Cohen – Ezra Cohen Watnick – Michael Flynn – JD Gordon  –  Christopher Steele – Michael Caputo -Breitbart News – Roger Stone – Julian Assange – Paul Manafort – Rick Gates – Jill Stein – Sam Clovis –  Kellyanne and George Conway – Peter W. Smith (deceased: suicide), Paul Behrends – Boris Epshteyn, Ike Kaveladze, and  Russia’s Felix Sater – Rob Goldstone – Emin Agalarov – Sergey Gorkov –  Sergey Kislyak, ambassador to the U.S., Natalia Veselnitskaya all connect directly or indirectly to the Trump/Russia investigation and some have a connection to Brexit, as well.
      According to the “Observer,” Mercer’s Cambridge Analytica was connected with Canada’s AggregateIQ through an intellectual property agreement and worked together on the Brexit referendum. Aggregate is also a data mining company. While Mercer was a big supporter of Trump, there is no known connection between AggregateIQ and Trump’s campaign staff.

       The Palmer Report.com  recently reported that Peter W. Smith (recent suicide) sought to collude with Russian hackers stealing emails from Trump’s opposition while claiming to be working with Michael Flynn.

      The Wall Street Journal  released two articles, one documenting Smith had some kind of recruiting connection with Steve Bannon and Kellyanne Conway. Unfortunately, Smith cannot be contacted to further confirm the story as he died of unknown causes shortly after his disclosure to the Journal.
            Additionally, IMHO, Vice President Mike Pence simply had to be aware of what was happening in the campaign, but is being shielded because he is the second in command if  President Trump is impeached and convicted  or forced to resign. Stephen Miller, Joseph E. Schmitz may be of interest to the FBI for information they possess relating to the FBI investigation.
      According to CNN Politics,  Marc Kasowitz has represented Trump for personal and business matters for years. Worth noting, Kasowitz is defending Russian bank, OJSC Sberbank in U.S. court, as well as a Russian billionaire, Oleg Deripaska, who has close ties with the Kremlin. 
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Note: Source of weekly economic calendar and good recap of indicators: mam.econoday.com.
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George Brooks
Investor’s first read
A Game-On Analysis, LLC publication
Brooks007read@aol.com
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Investor’s first read, is a Game-On Analysis, LLC publication for which George Brooks is sole owner, manager and writer.  Neither Game-On Analysis, LLC, nor George  Brooks  is  registered as an investment advisor.  Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. References to specific securities should not be construed  as particularized or as investment advice as recommendations that you or any investors purchase or sell these securities on their own account. Readers are expected to assume full responsibility for conducting their own research pursuant to investment in keeping with their tolerance for risk.

 

 

 

 

 

 

 

 

 

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