Dow 20,000 Today ?

Investor’s first read – Daily edge before the open
DJIA: 19,933
S&P 500: 2,263
Nasdaq Com.: 5,462
Russell 2000:1,371
Tuesday, December 27, 2016 9:06 a.m.
When making money in the market begins to get easier and easier, it is very hard for investors to even give thought to the party ending. That’s how normal people think.
That said, make room in that cerebral process for the possibility that 2017 could spring some surprises.
Unlike President Obama who inherited the worst recession/bear market since the 1930s, Donald Trump will inherit a solid economic recovery if long in the tooth.
This means there is room to run for the economy and stock market if corporate and some individual taxes are slashed and a ton of money spent on military expansion and selected infrastructure projects over the next 18 months.
As long as the Street believes this, the stock market can surge to incredible levels of overvaluation, far beyond historic norms.
The stage is set for that to happen.
However, if it becomes obvious (to the insiders) that only a smidgeon of this windfall is going to happen, the market will have to adjust to lower levels.
If these programs hit a wall, it could get ugly.
In a few words, be aware that the stock market always looks best before a correction/bear market. Odds favor another spike in prices going in to the new year with a widely publicized shattering of Dow 20,000, a level that gains credibility only owing to it being a round number.
For now, the fever festers with investors anxious to extend a bull market long-in-the-tooth and up 239%. They sense a bonanza, quick and easy money, and wild speculation in what is perceived as a “new era.”
There is a 40% chance January will feature a sharp correction, especially if the market spikes sharply higher going into the first week in January. Those odds are not enough to bail out, but are enough to be alert for the unexpected.
Without some earth shattering news, the Dow should break 20,000 and run up into year-end. Selling in winners should be delayed until 2017 in hopes of lower taxes.
The list of infrastructure stocks presented here on November 15 is consolidating in a sideways-to-up pattern after a nice run, suggesting confidence that infrastructure companies will see some big spend later next year.
SUPPORT “today”: DJIA:19,901;S&P 500:2,258; Nasdaq Comp.:5,451
RESISTANCE “today”:DJIA:20,016;S&P 500:2,267; Nasdaq Comp.:5,479
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.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.