Traders: Prepare to Sell on Strength

Investor’s first read – Daily edge before the open
DJIA:18,847
S&P 500: 2,164
Nasdaq Com.:5,237
Russell 2000:1,282
Monday, November 14, 2016 9:11 a.m.
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Unlike President Obama, who inherited the worst recession and bear market since the 1930s ( down 55%), President Trump will inherit a stable economy and bull market that has risen 225%.
While both the economic expansion and bull market are aging by historical standards, there is room to run “if” a Republican Congress, packed with deficit hawks, allow him to spend trillions of dollars on the infrastructure and military at the same time slashing corporate and individual taxes, and gutting social programs to offset the cost.
Congress kept Obama on a short leash, but may open the spigots for Trump. Then again, it may not.
Drastically increased fiscal spending combined with tax cuts would accelerate economic growth, jack up the stock market, as well as interest rates and inflation.
One thing we have not seen in the current bull market is rank speculation. Under the right conditions, large cap mid-cap, small-cap, and micro-cap stocks can surge to absurd levels, as investors scramble to make the big bucks blinded by the fear of “missing out,” buying stocks at historically overvalued prices hoping to sell them at yet higher prices. Investors who missed the bull market would be drawn into stocks, just in time to cap a bull market off, as the smart money sells.
The Street isn’t waiting for an answer, racing to buy infrastructure, bank, biotech, aerospace/defense, oil refinery, industrial, and healthcare stocks driving the DJIA to new highs, as well as the small company Russell 2000.
REALISTICALLY
It will take years for a huge increase in spending, corporate tax cuts, and reduced regulations to become reality at the bottom lines of corporations, and that assumes Congress goes along with Trumps plans.
If the deficit hawks in Congress or Democrat obstruction reject Trump’s
efforts, it will be more of what Obama faced.
In 2009-2010, I expected the infrastructure to be the full focus of government spending during Obama’s first year in office, and published features outlining the need and which stocks stood to benefit. It was a natural. Most states would be beneficiaries, therefore politically attractive to all members of Congress. It didn’t happen. What monies states got for infrastructure were spent on other things.
The following infrastructure companies ultimately stand to benefit, though have now been run up in price and are overpriced. Due to limited space, I am listing them by symbols.
ACM, CBI, EMR, MTW, TEK, URI, CBI, FLR, GLDD, EMR, VMC
GLDD, KBR, URI, TTEK, KBR, MLM, JEC, MDR, IGF (ETF).
These are not recommendations, just FYI.
TECHNICAL
Traders benefitting from the surge in Trump stocks should take profits as the market soars.
I can see rank speculation festering and the possibility of a wild surge, which usually happens in the final stages of a bull market. While it is premature to get overly excited about Trump’s policies, it is premature to expect a bear market.
There was a lot of cash on the sidelines before the election. Managers of that will be pressured to put it to work. >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
SUPPORT “today”: DJIA: 18,749; S&P 500: 2,157; Nasdaq Comp.:5,218
RESISTANCE “today”:DJIA:18,999;S&P 500:2,177; Nasdaq Comp.:5,281.
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THE BEST SIX MONTHS
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.
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iShares 20-Year Treasury ETF down 14% in 4 months
Long-term bonds have gotten hammered in the last three months. The iShares 20-yr U.S. treasury bond ETF has lost 14.6% since July. That’s nearly 6 times the yield an investor expected over 12 months. Obviously, 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%.
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MY TECHNICAL ANALYSIS of the 30 DJIA Companies:
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 November 11, 2016, a reasonable risk is 18,401 a more extreme risk is 18,354 Near-term upside potential is 19,017
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 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.
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Note: Source of weekly economic calendar and good recap of indicators: mam.econoday.com.
*Stock Trader’s Almanac
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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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