House Passage Trumpcare – Brief Rally

Investor’s first read – Daily edge before the open

DJIA: 20,661

S&P 500: 2,348

Nasdaq  Comp.5,821:

Russell 2000:1,345

Thursday,  March 24, 2017    8:56 a.m.

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TODAY

  The Trump administration desperately needs House passage of Trumpcare, so it can talk about moving on to tax reform. It’s going to have a tough enough time in the Senate. 

   Passage should trigger a rally, failure a test of yesterday’s March low from which the markets rebounded without a lot of conviction.

   Tuesday’s sharp plunge was the first indication the Trump celebration was losing its momentum, as it looks like the Trump stimulus is going to take longer than expected and may not be as dramatic as promised before the election.

    Then too, there is the overhang of the investigation of collusion between the Trump team and Russia before the election to ensure a Trump victory.

The truth will out on this one, but it will take months, even a year. It seems new disclosures keep popping up, the latest being Paul Manafort’s involvement with the Trump administration, first as  his campaign manager, later with further involvement with the Trump team before election day.  Manafort had ties to Russia in the past and reportedly had  indirect in recent years. 

    As I have noted here, the Street has been bullish so long as it expected  a tax cut, deregulation and a big spend on the military and infrastructure.

    If  new information surfaces suggesting collusion between the Trump team and Russia, uncertainty on the Street will mount putting a lid on further advances in a stock market that is already pricey.

TODAY:

     The futures trade on the upside before the open, suggesting the Street is betting on passage today or tomorrow.  A passage rally will run into overhead supply, since passage by the Senate in its present form is questionable.  A Senate passage would have more legs.

    

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SUPPORT “today”:DJIA:20,576;S&P 500:2,337;Nasdaq Comp.:5,798

RESISTANCE “today”:DJIA:20,776;S&P 500:2,368;Nasdaq Comp.:5,852

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CORPORATE EARNINGS (updated  March 3, 2014)

      Factset

Q1 earnings are projected to increase 9.0%.  2017 as a whole are projected at a plus 9.8% down from Dec. 31 estimates of 11.6%.  Currently, the P/E on trailing 12-month earnings is 19.8 x, and based on earnings 12 months out is 17.7 x. That compares with a 10-year average P/E of 13.9. 

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MY TECHNICAL ANALYSIS  of the 30 DJIA Companies:  (UPDATED 2/13/17)

 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  March 2, 2017,  a reasonable risk is 21,040 a more extreme risk is 20,938 Near-term upside potential is 21,367 .

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POLITICAL/STOCK MARKET

      Here’s my read on Trump given the opportunity to respond to a reporter’s question that he was somewhat vindicated about surveillance.  Devin Nunes, Republican and chair of the House Intelligence Committee, angered Republicans with his comment to FBI’s Comey earlier in the week, “You’ve put a big gray cloud over the Trump administration.” That is not the message the Trump administration wanted out there on top of all the negatives already surfacing.  What’s more, the administration needed an “upper” going into the Trumpcare vote today or tomorrow.

     So Nunes was given a layup to bypass his committee and run over to the White House to give the President a chance to respond to a reporter’s question, that he felt somewhat vindicated by the news of surveillance, which really had nothing to do with a wiretap by President Obama. On top of that, Nunes held a press conference to give his side of the story, again, without sharing the info with his committee – more collusion ?

     Bottom line:  Trump supporters, masters at confirmation bias, can now argue, Trump’s accusation of Obama had merit.  Nunes’ career as a politician won’t be cut short by Republicans, though his tarnished credibility may destroy him. I want to know the name of the media which posed the question to Trump – sounds fishy..

     The stench of the prospects of a Trump/Russia collusion increases with each disclosure and attempt to change the focus and cover the trail. 

    I still believe Paul Manafort  and Roger Stone hold the key to the puzzle.  I think they know whether there was collusion or whether Trump has financial ties to Russia or Russian billionaires, direct or indirect.  Properties somewhere ?  Indirect ownership in oil properties ?  Access to money ? 

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ODDS FAVOR

1-Trump’s presidency will implode within three years, Bannon will be gone, along with Breitbart News and Alt-Right’ influence.

2-Trump will put the United States on a war footing with North Korea in coming months with or without China’s cooperation.

3-Expect major domestic violence this summer as alt-Right groups confront protestors against Trumpcare and Congress’ gutting of a host of popular government programs.

4-Seeds of a recession will be planted as Congress guts programs needed and used by millions.  Stock market has its final run.

3-Social Security and Medicare will be targeted for drastic changes if the Republicans hold control of both houses in 2018 and Congress is successful in gutting most of social service programs and the EPA per Trump’s wish list.     

 WHY TRUMP WOULD 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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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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