Did Someone Just Blink ?

Investor’s first read – Daily edge before the open
DJIA: 21,271
S&P 500: 2,431
Nasdaq  Comp.:6,207
Russell 2000: 1,421
Monday, June 12, 2017    9:01 a.m.

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The Federal Open Market Committee (FOMC) releases the minutes of its May meeting Wednesday followed  by Fed Chief Janet Yellen’s press conference.  Another bump in interest rates is expected, even in face of a stalled economy.  Yellen may shed light on the Fed’s plan to normalize its balance sheet, which should start before year-end.
      Particularly disturbing Friday was the nasty plunge in the Nasdaq Composite which plunged 1.8%, the equivalent of a 380-point drop in the DJIA.  The DJIA and S&P 500 were relatively unchanged, helped by strength in energy and financials.

       So, what gives ?

       Highfliers like Facebook (FB -3.3%), Amazon (AMZN -3.2%), Apple (AAPL -3.9%), Microsoft (MSFT -2.3%), Alphabet (GOOG -3.4%) got hit, as hot money got nervous and hit the silk.
       Is this an ominous sign ?
       It’s a warning shot that confirms my concern about the consequences of the Street’s reliance on computer algorithms to do its thinking, where money managers  key on the same  parameters, indicators, and metrics in making buy/sell decisions.
        Many money managers/traders will get a “sell” decision simultaneously, causing a precipitous plunge in prices, and worst case a “gap” open where the market or stocks open much lower, not giving an investors a chance to sell.       

       We saw it in the market August 2015 (-12.5%), and January 2016 (-12.9%), and we will see it again at some point.  It’s group think, not everyone can get out a narrow exit at once, and we are now in an environment that heightens the risk, as the promise of  the Trump massive stimulus fades.
       Saturday, Barry Ritholtz penned a Bloomberg piece, “Trump’s Economic Agenda is Almost Dead,” where he noted, the “self-inflicted wounds of the most undisciplined presidency in history” stand to blow an opportunity to pass the massive stimulus promised by the election of Donald Trump.
      Another Bloomberg article, “Trump Bump in U.S. Growth Forecast Finds Its Limits,” tapped 44 economists for a survey.  Compared with a March, 27% of those polled cut their forecast this month compared with March when 14% did.
       Investors here and abroad are getting nervous about the  timing of the  stimulus promised by the Republicans.  
       Technology stocks in Europe and Asia  tanked overnight after the rout in Nasdaq stocks Friday. Futures trading here suggests another sell off in Nasdaq at the open.
        Can the weakness in the highfliers spill over to the rest of the market ?

        The S&P 500 trades at  17.7 times earnings (P/E) projected 12 months out compared with a 10-year average of 14.
         Obviously, that overvaluation reflects the Street’s expectation of a massive stimulus.  Obviously, that is not happening as fast as the Street hoped. While the Trump administration plans to ram a half-assed replacement of Obamacare through before June 30, tax cuts, deregulation and Congressional approval of a big spend on infrastructure and/or the military may not happen soon enough to head off a correction in the market.
        What’s more, Trump may press for a debt ceiling showdown in August/September with Congress if he doesn’t get his way on the stimulus.
        The Obama bull market  was up 225% (to Nov.9), the Trump bump added  11.2% to that. There is room for an 8% – 12% correction if  the big hitters break ranks and dump indiscriminately.
TODAY
        The market will open lower today, but rally. The intensity of that rally will provide a clue to whether the market can shake off Friday’s hit in the Nasdaq Comp. or yield to a broader based correction.
        The Nasdaq Comp. got hit briefly in March and mid-May, so this could be another blip. It’s up to everyone to ascertain their own tolerance for risk.                                                                                                                                                                                                                              
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SUPPORT “today”:DJIA:21,167;S&P 500:2,411; Nasdaq Comp.:6,077
RESISTANCE “today” DJIA:21,321;S&P 500:2,439;Nasdaq Comp.:6,226

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CORPORATE EARNINGS
(updated June 9, 2017)
Factset
      Q1 earnings are projected to increase 14.0%.      Q2 growth  is projected at +6.6%, Q3 at +7.5%, and Q4 at +12.4%. For 2017 as a whole growth is projected at a plus 9.9%.  Currently, the P/E on forward  earnings is 17.7 x. That compares with a 10-year average P/E of 14.0.
Note: These numbers change frequently.
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MY TECHNICAL ANALYSIS  of the 30 DJIA Companies
:  (UPDATED 5/15/17)
      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  April 25, 2017,  a reasonable risk is 20,856 a more extreme risk is 20,703.Near-term upside potential is 21,333 which was hit yesterday.
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POLITICAL/STOCK MARKET
SENATE READY TO PASS ACA REPEAL/REPLACEMENT
     
Senator McConnell has started the process known as Rule 14, enabling the Senate to bypass standard procedures, including committee hearings and markups, in a desperate attempt to ram a bill  on the replacement of ACA through before the July 4th recess. The strategy is to push it through quickly before any opposition can develop.
      The Republicans now “own” healthcare after 8 years and 55 attempts to skewer ACA. 
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      ANYONE SEE JARED KUSHNER ?    ?????
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      If you watched Fox News, you are relieved that there was no smoking gun following former FBI director James Comey’s testimony Thursday before the Senate Intelligence Committee.
      If you watched another less biased TV channel, you are convinced this is just the beginning of a long, open-ended investigation of potential wrongdoing by the Trump team before and after the 2016 election. I have no doubt the Trump people knew what the Russians were doing, even aided and abetted them along the way.  The Quid pro quo here is where it begins to really smell.

       I am prepping for the unearthing of the biggest political scandal in our history. Watergate was double-A ball, the is  the “BIGS.”
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“Connect the Dots.” This investigation is open-ended
      
Farage – Trump- Sessions – Mercer – Cambridge Analytics – Bannon- Page – Kushner – Michael Cohn – Flynn – JD Gordon  – Breitbart – Stone – Assange – Manafort – Russia all connect directly or indirectly to the Trump/Russia investigation and 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.
      Additionally,  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.  hmmm.
       WHY SO MANY RUSSIANS ? WHY ALL THESE RUSSIAN CONNECTIONS ?  THIS IS GETTING BIGGER – IMHO THIS WILL BE THE BIGGEST SCANDAL “EVER” AND MAY TAKE YEARS TO FULLY UNWIND.
          Was there a GLOBAL POWER PLAY here ?  Britain, United States, France, Netherlands, Sweden, Italy ?   Who was the puppeteer who were the puppets ?
        The new kid on the FBI “person of interest” block in its US counter-intelligence investigation is Nigel Farage, a Brit, former UK Independence Party (UKIP)  leader and tactician for Brexit. He may be positioned to have a lot of pertinent information about 2016 election tampering. Reportedly, he has had direct or indirect contact with all of the above. 
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Trump Backs Out of Paris Climate Change Accord
     
As expected, Trump backed out of the Paris Accord where 149 nations committed to reduce  harmful greenhouse gases produced by the burning of fossil fuels.  The “Make Great Again USA,” joins the only other two dissenting nations – Syria and Nicaragua.
      Trump must wait until November 2019 to make it official.  The decision can be reversed by Trump himself or a new president in 2020. Trump has implied he wants to renegotiate the deal to strike more favorable terms for the US.  

       Last week USA TODAY’ s “WHAT the Paris climate agreement withdrawal means for the U.S. economy,”  outlined how much Trump’s decision hurts America going forward
-we lose our seat at the table  for climate talks.

-we lose our ability to financially capitalize on the global shift to renewables.
-it reduces our ability to lead in the development of  cheap energy and sell that technology globally.
-job gains in renewables will slow. Over the years this could cost hundreds of thousands of jobs.  Renewables employ close to 14 times coal industry.
        AXIOS.com reports that some 30 mayors, three governors, 80 university presidents and 100 businesses  plan to submit a plan to the United Nations pledging to meet U.S. greenhouse gas emissions targets under the  Paris climate accord.
       “I was elected to represent the citizens of Pittsburgh, not Paris,” Trump said explaining his decision. Pittsburgh Mayor Bill Perduto was quick to remind Trump that 80% of  the city of Pittsburgh voted for Clinton.
      
Once again, Trump has relinquished the United States’ lead on an important global issue, reducing our credibility and opening the door for another country to fill the slot. 

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      President Trump’s budget is obviously DOA, with lots of blowback by Republicans looking to their prospects of re-election in 2018. The budget is a disgrace to who we are as Americans, as it skewers a portion of our society with little ability to defend itself, much less survive.     
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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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PREUTERS WORLD NEWS APRIL 19, 4:20 PM
“A Russian government think tank controlled by Vladimir Putin developed a plan to swing the 2016 U.S. presidential election to Donald Trump and undermine voters’ faith in the American electoral system, three current and four former U.S. officials told Reuters.
      Russian documents appear to confirm what U.S. intelligence agencies have believed  all along that Russia influenced the outcome of our presidential election. 
      It recommended that a, “propaganda campaign on social media and Russian backed global news outlets to encourage U.S. voters to elect a president who would take a softer line toward Russia than the administration of then-President Barach Obama, the seven officials said.”
     Additionally, a second institute document recommended Russia end its pro-Trump propaganda and intensify messaging about voter fraud to undermine the U.S. electoral system’s legitimacy and damage Clinton’s reputation.
      So far, investigations by U.S. institutions and Congress have not concluded collusion between Trump’s team and Russian operatives occurred.
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TRUMP  IS TOAST ?
      Just a hunch, but I think collusion regarding influencing the election is only part of something much bigger, like major league money transfers for options on oil investments, real estate holdings, and land deals. That’s why it is taking so much time.
      If we begin to see more and more of VP Pence, it may suggest the end for Trump is getting closer. Clearly, the inside knows something is about to break.  Trump is “toast,” IMVHO.
      There are so many people who know so much, and they are going to be watching out for number ONE, and that is not Donald Trump.

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TRUMP TO PUT US  ON  A WAR FOOTING !
      
Expect the Trump administration to put the United States on a war footing within one year, probably regarding North Korea.  For one, it would justify its big military spend. For another, it would facilitate a mid-term election victory, since voters are reluctant to change  Congress significantly when the nation is gearing up for war.. It worked for George Bush in 2003.  Finally, it would deflect attention away from the Trump/Russia issue, that could sink the administration.
ALL OF THE ABOVE HAS THE POTENTIAL TO ADVERSELY IMPACT THE STOCK MARKET  AND   MERITS CONSIDERATION.
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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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