Boom or Bust ? Ask Congress

Investor’s first read – Daily edge before the open
DJIA: 19,819
S&P 500: 2,249
Nasdaq Com.: 5,432
Russell 2000:1,363
Friday, December 30, 2016 9:06 a.m.
Hope 2017 Treats You Well
The Street is hoping for another leg up in stock prices on top of a 238% bull market gain, which can happen in face of tax cuts, deregulation and a big spend on the military and infrastructure.
Expectations are driving the bull’s hopes. Reality may bring everything to fruition, or dash hopes. As long as the Street does not know the answer, the bulls have a shot at that up leg.
Mr. Trump is a Republican, yet he trashed all leading Republicans in the primaries. This is his brand of the Republican Party. If that doesn’t sit well with all the rest of the Republican Party, there may be opposition to his goals along with the Democrats.
That’s the big unknown. That’s the difference between a flat 2017 and a 20% gainer.
It will be good to put all this year-end mishmash behind us today. There will be tax selling next year and institutional portfolio window dressing, but the institutions will come out of the on deck circle to take their cuts.
Let’s not overlook the Fed. IMHO, they are control freaks and we will see a parade of its Governors and Fed bank presidents pitching their preferences for one, two, or three rate increases this year.
A strong economy and buoyant stock market should be able to overrun the Fed-speak and action until a third rate hike.
No one is looking for a sudden downdraft in prices starting in January, which is a good reason to give it a 40% chance. It just can’t be this easy to make money. Darts anyone ?
SUPPORT “today”: DJIA:19,798;S&P 500:2,252; Nasdaq Comp.:5,443
RESISTANCE “today”:DJIA:19,863;S&P 500:2,254; Nasdaq Comp.:5,453 ;
Corporate earnings.
Factset now sees Q3 earnings for the S&P 500 up 3.0%. On Sept. 30, its projection was for a decline of 2.2%. Q4 is projected at a gain of 5.2%, the year projected to come in at plus 0.1%. Earnings for 2017 are expected to increase 11.4%. Currently, the P/E based on 12 months out is 17.1x, which compares with a 10-year average P/E of 14.3x.
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 December 14, a reasonable risk is 19,713 a more extreme risk is 19,657 Near-term upside potential is 20,123
 OPPORTUNITY: RISK: Selective opportunity ! Risk is reality at some point
 CASH RESERVE: 25% – 35%.
 KEY FACTORS: Speculative fever driven by expectations of tax cuts, lifting of regs., and lots of money dumped on economy.
Note: Source of weekly economic calendar and good recap of indicators:
*The Fiscal Times – 12/22/16 – Eric Pianin
George Brooks
Investor’s first read
A Game-On Analysis, LLC publication
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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