White House Stumbles – Street Wary

Investor’s first read – Daily edge before the open
DJIA: 20,304
S&P 500: 2,337
Nasdaq Comp.:5,782
Russell 2000:1,396
Wednesday, February 14, 2017 9:12 a.m.
Suddenly, the Trump honeymoon seems to be over……before it really started. Serious questions have arisen about Trump’s connections direct or indirect, with Russia, General Flynn’s resignation, security lapses, lies, misinformation, border tax issues, ethic issues, and the travel ban fiasco.
All this in just 26 days. Russia just won’t go away and the Street may now be questioning if in fact there is more to come. Clearly the media is pressing hard, sensing something of Watergate proportions.
Doubts may begin to surface about the ability of the Trump administration to deliver on its plans for tax cuts, a big spend and especially deregulation.
With the stock market hitting new highs every day, and the bull market 8 years old and up 251%, there is no room for major league doubts.
So far, none of these events is big enough to harpoon the bull market. They can add up though to hinder the effectiveness of this administration. If the Russia situation blows up, the bull market is over.
What’s my point ? Just proceed with an open mind, and have a cash reserve until this is resolved.
Odds favor a slowdown in the market’s advance, very possibly a consolidation and sideways trading range. A bear market will develop if the Trump administration implodes.
If not, more upside

Noting that the economy was chugging along at a “healthy pace, Fed Chief Janet Yellen hinted more rate hikes may be in order, nudging the odds up for a bump in rates at its March 14-15 meeting. The Fed indicated after its December increase, the second in a year that the Street could expect up to three bumps up in 2017.
Treasuries fell and the U.S. Dollar rose, but Wall Street was not phased.
Today is big for reports on the economy. (Consumer Price Ix., Retail Sales, Empire State Mfg., Industrial Production, Atlanta Fed Business, Business Inventories, and the Housing Market Ix.). Thursday we get Housing Starts, Jobless Claims, and the Philly Fed Business, Friday it’s E-Commerce Retail and Leading Indicators.
SUPPORT “today”: DJIA:20,417; S&P 500:2,324; Nasdaq Comp.:5,751
RESISTANCE “today”:DJIA:20,566;S&P 500:2,345;Nasdaq Comp.:5,798
– the prospect of big corporate tax cuts, deregulation, a big spend on the military and the infrastructure and the restructuring of long-standing trade agreements.
-the possibility they will take longer than expected, worst case be disappointing.
-the uncertainties of the repeal of Obamacare
-talk of privatization of Medicare and Social Security
-possible undermining of NATO and the European Union
-a trade war of sorts.
-lifting of sanctions on Russia for its incursion in the Crimea and actions in Syria, adding to questions already breached.
-continued internal polarization of America and the possible extension of such to other countries.
-intense economic stimulation by the Trump/Republican Congress stands to trigger a rebound of inflationary pressures forcing the Fed to bump interest rates sooner than expected.
-an increasing erosion of investor confidence in President Trump.
-the real possibility of Trump putting the country on a war footing to ensure patriotic support for the mid-term elections, or a pre-emptive attack on North Korea or Iran.
-the possibility, though remote at this time, that the Trump/Russia connection may blow up.
What are they hiding ?
The Issue of a deep Trump/Russia connection just won’t go away, suggesting something big (und ugly) lurks. The House blocked the Democrat’s attempt to force Trump to release his tax returns. WHY is this such an issue ? What is being hidden ? If there is nothing to hide, why not release the returns and put the issue to bed ? The more he resists, the greater the suspicion.
The Trump administration detests checks and balances, and that is precisely why they are in place. Odds favor one or more constitutional crises this year as Trump’s marauders endeavor to impose their far right agenda.
Obviously, the Republican Party has been radicalized. No more reasonable debate leading to a compromise.
This is (so far) a bloodless coup, a rape and pillage of anything that smacks of social services, equal opportunity and compensation for people of color and of other than the male gender.
Conservatives no longer exist. I miss them, at least they were consistent and reasonable within reason. This mob is extreme, and in my opinion un-American based on what our Founding Fathers gave us, all the progress made improving on that since and the hundreds of thousands of lives that were given to preserve all that.
At some point, this disruption will adversely impact the stock market with the potential for a 35% – 45% bear market.
NOTE: Talk of privatizing a portion of Social Security for people under 55 years of age is making the rounds. The program has worked very well with funds invested in special issue bonds yielding 1.375% to 5%. Why screw with it. Human nature dictates investors tend to buy stocks at highs and sell at lows. What’s more, this idea is being floated with the stock market at all-time highs. What’s even more, Congress will be tempted in future years to increase the portion of Social Security funds allocated to stocks to satisfy projections into the future and justify its tapping the Social Security funds for other expenditures. >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Corporate earnings (updated Feb. 11, 2014)
Factset now sees Q4 earnings for the S&P 500 up close to 5.0% vs. a Dec. 31 projection of plus 3.0%.
Earnings for all of 2016 is now projected to be plus 0.5%.
Q1 earnings are projected to increase 9.9% on revenue growth of 7.5%. Q2 is projected at ao plus 9.1% and 2017 as a whole are projected at a plus10.3% down from earlier estimates of 11.4. Currently, the P/E based on earnings 12 months out is 16.9 x, which compares with a 10-year average P/E of 14.4 and a 5-year P/E of 17.3% well above the 10-year average of 14.4%..
MY TECHNICAL ANALYSIS of the 30 DJIA Companies: (UPDATED 2/13/17)
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 January 27, 2017, a reasonable risk is 20,361 a more extreme risk is 20,286 Near-term upside potential is 20,967 .
 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: mam.econoday.com.
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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