The Fed, China, N.Korea, Syria, Russia !

Investor’s first read – Daily edge before the open
DJIA: 20,648
S&P 500: 2,352
Nasdaq  Comp.:5,864
Russell 2000:1,352
Thursday, April  6, 2017    8:56 a.m.
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The market averages broke out robustly from a consolidation pattern yesterday with the DJIA up 200 points in the morning before running into resistance and closing on the downside, erasing a nice gain.
      Enter the Federal Reserve with the minutes of its March meeting and news that later this year the Fed plans to begin unwinding its $4.5 trillion bond portfolio amassed over eight years of Quantitative Easing to support the economy which was rising out of the worst recession (Dec.2007 – June 2006) since the 1930s. It didn’t help that some members said they felt the stock market. Its portfolio consists of treasuries and mortgage-backed securities. To date, it has been reinvesting the proceeds from the bonds and rolling them over rather than reducing its balance sheet. That will end.
      All this should not come as a surprise to the Street, in fact, the release of the Fed’s intent should be a relief.
      So, back we go to the massive stimulus the Street has salivated over for six months.  Can a floundering administration with its leader sporting a 36% approval rating, unable to pass its first campaign promise, (repeal/replace ACA), deliver on its other promises, and when ?
      Trump has a chance to add a few quality points to his record low approval rating this week if he can negotiate some progress on trade and North Korea with China’s president Xi Jinping starting today at (you guessed it) Mar-a-Lago at Palm Beach,  Florida.

       Then too, what is he going to do with Syria, whose President Bashar al-Asaad is responsible for gassing its own people, something Trump reportedly deplores ?
      Then too, we have the investigation of pre-election  collusion between Russia and the Trump team to skew the results in Trump’s favor.
      Yesterday’s jolt indicates an increasing nervousness on the Street about a host of issues, all referred to herein.
      The markets should regain some of what it gave up yesterday after the Fed news about reducing its balance sheet.  The key will be, can it hold today’s gain ?
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SUPPORT “today”: DJIA:20,578;S&P :2,344; Nasdaq Comp.:5,837
RESISTANCE: “today”: DJIA:20,756;S&P500:2,364;NASDAQ Comp.:5,887

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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
     
The more Trump squirms to find a way to divert attention from the main issue demanding resolution, the guiltier he looks.
      The current diversion is Susan Rice who Trump accused of being politically motivated when certain Trump associate were included in a sweep of foreign officials last year by U.S. intelligence agencies. Their identities are usually not revealed, but may be if national security is an issue. To everyone’s surprise, Trump claims in a tweet that Rice committed a crime when certain individuals were “unmasked”. Rice was National Security Advisor to President Obama from 2013 to 2017.

      Steve Bannon of Breitfart fame, was removed from the National Security Council and replaced with Rick Perry, Energy Secretary.
      Bannon may be in a pickle for violating an ethics pledge for communicating with Breitbart News editors after assuming his position as Trump’s chief strategist. Reportedly, Bannon still holds a position of importance, though his removal may indicate a distancing of the White House away from the extremist Alt-Right ideology which is way, way out there in right field.
      Breitbart News and Bannon himself have been backed financially by billionaire Robert Mercer  and daughter Rebekah. Originally a backer of Ted Cruz, the Mercers switched support to Trump when Cruz bombed last year. My point here is, just how far will Trump go in pulling the plug on Bannon with Mercer there with the big bucks ?
      Then too, will Mercer want out if Bannon runs into trouble.  He did bail on Cruz ?  Interesting. Mercer is a highly successful and obviously brilliant quant hedge fund manager, and he too is out there in deep right field.
CHINA’S Xi
      Trump meets with China’s president Xi Jinping today to discuss trade, North Korea and currencies. Xi will have to overlook Trump’s campaign rant, “We can’t continue to allow China to rape our country, and that is what they are doing. It’s the greatest theft in the history of the world.”
      Both have a lot to be gained from this meeting.  Trump doesn’t want to look like a doormat, and Xi needs to show he can deal with Trump.
      My guess is some concessions on China’s yuan, as well as China’s promise to put the arm on North Korea, or MORE !       
      Ex-Blackwater founder, Eric Prince is back in the headlines. The Washington Post reports  the United Arab Emirates (UAE) arranged a meeting on January 11 between Prince and a Russian close to Putin  intended to ultimately establish communication between Russia and President Trump.  The meeting was held in the Seychilles Isands in the Indian Ocean.  The Post reports that one item on the agenda was to encourage Russia to curtail support for Iran and Syria ( on the Trump wish list) in exchange for lifting the U.S. sanctions on Russia.
     
Prince, brother of Education Secretary Betsy DeVos, is a big supporter of Trump, having contributed $250,000 to his campaign.  A libertarian, Prince has global investment and business interests focused on below the radar activities related to providing security for the UAE and elsewhere, as well as developing mercenary forces for strategic deployment  by the UAE and African nations.

TRUMPCARE
     
Trump is scrambling to get an Obamacare repeal/replace plan agreed on for vote this week. The administration is negotiating with the Freedom Caucus to arrive on an acceptable plan.  That spells trouble for policy holders since the Caucus pushed for less coverage at greater costs than offered by the Republicans’ first try with AHSC (Trumpcare).  Trump wants a “WIN” at any cost.
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.
      T
he “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 !
       THE STAGE IS BEING SET NOW !
      
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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