Stall or Pause Before a Surge ?

Investor’s first read – Daily edge before the open
DJIA: 19,942
S&P 500: 2,270
Nasdaq Com.: 5,470
Russell 2000:1,387
Thursday, January 5, 2017 8:48 a.m.
Futures trading suggests a mixed-to-down open. Probably investors putting gains into 2017 in hopes of a better tax break.
Or is it the unease I feel about Congressional overreach and the irrational behavior of President-elect Donald Trump ?
Disclosure: I voted for Clinton (no surprise). I was appalled by the Trump campaign, it crossed all the lines of respect for human beings I hold dear. My warnings about him as the President have nothing to do with denial or sour grapes, or gee if only….., or, there goes the Supreme Court appointment, etc.
I am genuinely alarmed by his behavior. I have a feeling he is hiding something which will be discovered, or that he is so irrational, he will do enormous, possibly irreparable, damage to the United States and to many, many Americans.
Regardless of party affiliation, investors MUST consider the possibility that his presidency will implode, that he will be forced to resign or be removed from office (impeached).
I believe the Republican Party would be thrilled to be in a position to oust him, since he is totally destroying the Republican Party, which with overreach, will finish the job. I think they would prefer Pence anyhow.
“Buy the rumor, sell the news” is one of those Wall Street bromides, which I’m hearing with reference to Dow 20,000. Yes, maybe it would momentarily break 20,000 for a few days, but it’s just another number. This level will have to reject quite a few attempts break through before it is a key level.
More to the point, my Dec. 8 post (DJIA: 19,549, S&P 500: 2,241) headlined, “PANIC ! Speculative Fever Heating Up – Trump Rally Over by Inauguration Day ?” That would be more plausible if the market is stampeding higher as Jan. 20 approaches.
The Fed did not hold a press conference, so the Street had only minutes from the prior month to chew on with little reaction.
So far, the trend is positive. Early January can be tricky. Historically, the first week tends to set the tone for the month and subsequently for the year.
The Street is salivating over the prospects of a windfall, kind of a feeding frenzy at a gourmet smorgasbord.
Anyone stepping aside from the euphoria will realize that this “do nothing” Congress may do little of what Trump would like to embellish his legacy, as the greatest.
That’s why I say, play hard, but sit close to the exit, though many are not nimble enough to do that.
This bull market has shrugged off many serious crises over eight years, maybe it can ignore the Trump follies for a while, hopefully.
Buyers should lie in wait for lower prices. If not, we could have a problem.
SUPPORT “today”: DJIA:19,846: 2,259;S&P 500:; Nasdaq Comp.:54,61
RESISTANCE “today”:DJIA:20,019;S&P 500: 2,279; Nasdaq Comp.:5,487
I wrote the following in 2007 as I became increasingly aware of “risk.” I was not aware of how disastrous the subprime mortgage/housing bubble situation had gotten, just appalled how extreme the use of derivatives had become. As most of you know the bear market/recession that followed took us to the brink of a total meltdown. I am again concerned for the market, not so much about derivatives but the Trump presidency.

Perfect Storm Looms
The perfect storm in our financial markets is looming.
….It will take a heroic international effort to avert a meltdown of huge magnitude…
….Trading in everything may have to be stopped until some sort of sanity is restored
….This can get real ugly. No one has a handle on the leverage amassed in derivatives
….No one has a true handle on how precarious the situation out there is, and that uncertainty feeds on itself, prompting increased selling…With few buyers, stocks tank.
…Only when a cauldron of fear begins to boil, do you have a market that is reasonably safe to invest in.

George Brooks
August 19, 2007
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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