Street Preps for Q1 Earnings

Investor’s first read – Daily edge before the open
DJIA: 20,663
S&P 500: 2,363
Nasdaq  Comp.5,911:
Russell 2000:1,385
Monday, April  3, 2017    9:06 a.m.
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     Earnings for Q1 will be reported in coming weeks. As of December 31, Factset was projecting a gain of 12.5%.  Currently that gain has been revised down to 9.1%. For all of 2017, Factset now see a gain of 9.8% versus its projection of 11.5% at year-end.

     The S&P 500 is currently trading at 24.7 times trailing earnings and at 18.3 times earnings 12 months out.  Its 10-year average P/E is 13.9.

      The S&P 500 P/E a year ago was 23.8X, so the over valuation cannot be attributed to the massive stimulus promised by President Trump.

       Most of the current market weakness can be attributed to increasing uncertainties arising from allegations of collusion between the Trump team and Russia to rig the Presidential Election in November in favor of Trump.

       While this investigation may prove the allegations are justified and may even uncover additional wrongdoing, the proof may take many months to develop.  Then too, the Street will be slow to abandon its hope for tax cuts, deregulation, trade reform. and a big spend on the military and the nation’s infrastructure.

        In short, this is a bit like driving 75 mph in the pass lane in a deep fog with a10 yards visibility.  Betting on a massive stimulation may pay off big time, then again in may be disastrous.

         Based on allegations, I think the market is seriously overvalued.  If serious wrongdoing by the Trump team is true, worse yet, the biggest political scandal ever, the market is headed south maybe 30% – 45% down.

          If the allegations are unfounded, the Trump administration will likely execute most of its promises and the bulls be rewarded handsomely.

          I think the allegations are well founded, whether they will be proved near-to-intermediate-term is another issue.

          For investors, it is an issue of risk tolerance. What is important here is for investors to understand the magnitude of the risks.

          The Street marches to the drumbeat of computer systems programmed for a variety of possibilities. Most key on the same risk signals meaning a SELL is likely to be triggered by most simultaneously giving investors little chance to react before sustaining a significant loss.           

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SUPPORT “today”:DJIA:20,603;S&P :2,356; Nasdaq Comp.:5,903
RESISTANCE: “today”:DJIA:20,723;S&P500:2,367 ;NASDAQ Comp.:5,921

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CORPORATE EARNINGS (updated  March 31, 2017)
Factset
Q1 earnings are projected to increase 9.1%. That compares with a Q! est. on Dec. 31 of +12.5%.  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 17.6 x. That compares with a 10-year average P/E of 13.9. >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
MY TECHNICAL ANALYSIS  of the 30 DJIA Companies
:  (UPDATED 3/29/17 and )

 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 29, 2017,  a reasonable risk is 20,413 a more extreme risk is 20,196.Near-term upside potential is 21,113
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POLITICAL/STOCK MARKET
      BIGGER SCANDAL THAN WATERGATE IN THE WINGS ?  I think so.  Attempts to cover it up will delay findings, but there are simply too many individuals who know too much and who will surface.

      Yep, this will be one constitutional crisis after another with the end result a loss of Republican control of Congress in 2018.

      That’s another reason Republicans will hesitate to assist in any cover up.  Network and cable television have never had it so good, this stands to be a reality show second to none.

     Trumpcare may get another vote before the House goes home for a two week recess April 7, when they will have to face constituents.

        No telling what a compromise will look like. My guess is the public will get the short end of it.

        Not only will the representatives have to answer to Trumpcare’s failure, but tax reform may take longer than expected and the big earners stand to get a big tax break if Trumpcare is passed.

        Trump is saying he wants to bring the Democrats in on a Trumpcare compromise.  Based on everything I have been hearing since Trump entered the race, I don’t believe a word of it. I think Trump wants to be able to blame the Dems for the failure to bring it to another vote to pacify  supporters when Republican voters  go on a two week recess.

       While his base won’t concede, Trump may be brought down by his own ego, as the “Russia situation” seems to worsen daily for President Trump and his chief strategist, Stephen Bannon.

         Look for a “Make America Great Again” advertising blitz in coming weeks, funded by the Mercers.  I am not sure it is a good idea to attract attention at this time, since the Mercers funded Breitbart News and Stephen Bannon, former head of Breitbart and currently strategic advisor to Trump. Reportedly, the FBI has expanded its investigation of collaboration to Alt-Right Breitbart News.

      According to Business Insider.com, Jared Kushner failed to disclose meeting with the CEO, Sergey N. Gorkov, of Vnesheconoombank in December 2016. The bank is Russia’sbank for “Development and Foreign Economic Affairs.  Reportedly, the bank was struggling in face of Russia’s economic woes.  Kushner was seeking investors for a Fifth Avenue office building that is reportedly set to be financed through Anbang Insurance Group, a company with ties to the Chinese government. A White House spokesman denied the New York office project was discussed.

      What then was discussed ?

      What’s worse, CNN’s national security analyst, Juliett Kayyem,  speculates that the FBI has been talking with Mike Flynn, formerly close advisor to Trump.  Flynn was forced to resign when it became apparent he was lying about dealings with Russia.

      The FBI wants to know if Breitbart and INFO Wars, another far right wing site, had a role in  Russian cyber attacks and the spread of fake news, where automated computer commands called “bots” distributed stories to the social media that were pro-Trump and anti-Clinton.

      Generally, a “bot” is designed to automate tasks, bypassing the need to do them manually.    

     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, though Flynn is now in the running.  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 ? 

      I don’t think this gang expected to win, and as a result got careless and made some bad decisions when Russia came on the scene.
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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 tax reform 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.
5-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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