Markets Must Now Find a Comfort Level

Investor’s first read – Daily edge before the open
S&P 500: 2,139
Nasdaq Comp.5,193:
Russell 2000:1,195
Wednesday, November 9, 2016 9:08 a.m.
The world was shocked last night.
One thing about President-Elect Trump that most people would agree with is, he marches to a drumbeat no other president in memory marched to. If the world interprets that as “unpredictable” we are looking at ongoing uncertainty.
Perhaps (hopefully) he can be a president of all the people as he proclaims now. That’s going to be difficult based on his pre-election rhetoric.
With possession of the White House, Congress and the Supreme Court, the Republicans now have total control of direction of the country, to an extent, a lot that will happen globally.
They have a wonderful opportunity to proceed with a balanced strategy to change what needs to be changed, and improve what shouldn’t be changed.
Will they proceed carefully, or will it be a feeding frenzy – repeal of Obamacare, sent millions of immigrants back where they came from, weaken NATO, slash taxes for corporations and wealthy as well as funding for dozens of social programs, privatize Medicare and Social Security, etc.
For investors, this is highly important for the obvious reason, the stock market thrives on confidence, and dives on lack of it.
Now comes the analysis, of what went wrong for the Dems, and why the American voter opted for Trump.
Voters wanted change, want pols out, wanted good old days back, wanted the USA to kick butt, not take any crap, and make sure people know their place.
If that’s the case, why did they re-elect so many incumbents ?
What else is going on ? The pundits will chew on that for a long time.
Overnight markets have had a chance to take the punch and recoup some sense of stability.
The announcement of the Brexit decision hammered stocks in early trading June 24, but the stock market rebounded to new highs, though the damage to the Brits of Brexit worsens by the day.
Initially, the Street will want to rationalize that not much has changed. People still rise in the morning, put on their clothes, grab some breakfast and go to work……
Unlike eight years ago, the world economies are not in meltdown, so why not continue our economic recovery and maybe accelerate it with huge tax breaks for corporations, the repatriation of U.S. corporation profits parked abroad and spend it on the infrastructure.
The Street can find reason to override the drag of uncertainty, for a while.
I am not so sure the Street can treat the election results so glibly. To the Street’s credit, the bounce back from utter carnage is laudable, but is it realistic. We know NOTHING about what will transpire during the next four years, so realistically, the market must find a comfort level that discounts this lack of knowledge.
I expect an attempt at stability, even a rally, then lower prices. Risks for buying the sell off are high.
SUPPORT “today”: DJIA:18,101; S&P 500:2,113; Nasdaq Comp.:5,131
Risk of sell off starting mid-day are good, this time well below the support listed hers (DJIA:17,950; S&P 500: 2,096; Nasdaq Comp.: 5,069
RESISTANCE “today”:DJIA:18,336;S&P 500:2,141; Nasdaq Comp.:5,195.
The six months between November 1 and May 1, tend to outperform the six months between May 1 and November 1, labelled the “Best Six Months” by the Stock Trader’s Almanac which began tracking the pattern in 1986.
iShares 20-Year Treasury ETF down 9% in 4 months
On Wednesday, the Fed indicated that the case for a bump in interest rates has increased, but opted out of doing it this month. It looks like it will happen in December.
Long-term bonds have gotten hammered in the last three months. The iShares 20-yr U.S. treasury bond ETF has lost 9.1% since July. That’s four times the yield an investor expected over 12 months. Bonds can be risky. Let’s not forget the name of the game is to buy low and sell high, which applies to long bonds as well as stocks.
A survey of economists reported by Bloomberg yesterday calls for U.S. inflation to surpass the Fed’s target in every quarter of 2017, which if even half true should depress long-term bonds even more.
The Employment Situation report came in Friday, 161,000 jobs were added in October, the unemployment rate was 4.9%.
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 October 21, 2016, a reasonable risk is 18,026 a more extreme risk is 17,986 Near-term upside potential is 18,481.
 STATUS OF MARKET: Neutral – trending to bullish
 OPPORTUNITY: RISK: Opportunity !
 CASH RESERVE: 25% – 35%.
 KEY FACTORS: Uncertainty of election to be resolved in two days, earnings slide may be over.
Note: Source of weekly economic calendar and good recap of indicators:
*Stock Trader’s Almanac
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.