All three after January 20?
|- Lower Taxes
- Less Regulation
- Fiscal especially Infrastructure Stimulus
Will the current low interest-rate and slow US growth environment change in 2017? We think so by H2 2017, not later 2018+ as some (many?) establishment economists believe.
THE TIMES THEY ARE ACHANGIN
Many investors believe the world changed November 8th. 2016. For obvious reasons, more analysts who did not do so earlier, are downgrading China and Mexico equities. Furthermore Big Banks, rather than Alcoa, more appropriately now lead US market’s earning season.
Three BIG known unknowns:
- First and foremost Donald Trump but I believe only a low probability of major trade wars.
- ISIS as it continue to lose ground in Iran and Iraq.
- How Congress, the Fed, businesses, consumers will react as global events unfold.
While markets are not cheap, investors are not likely to face a fresh reason to sell in this coming earning season, beyond normal profit taking money management. While we see more future winners than losers, intermediate term, we see a potential of 5% on the upside vs. 10%+ on the downside.
BOTTOM LINE:
- Stock picking should outperform in 2017.
- As is often the case, we prefer the risk/reward of the downside both in positional trading and for portfolio hedging purposes. The short term trading strategy of reflexive DJIA sells 19970-20030 and quick profit taking may continue to be successful except this coming Friday.
| Markers | DJIA | SPX | NASDAQ | SILVER | GOLD | OIL |
| 2016 close | 19762 | 2238 | 5383 | 15.96 | 1152 | 53.89 |
| 1/13/2017 | 19885 | 2274 | 5574 | 16.83 | 1197 | 52.52 |
| PIVOTS | 20000 | 2280 | 5500 | 16.50 | 1177 | 50 |
| RESISTANCE | 20000 | 2280 | 6250+? | 18 | 1225 | 58 |
KEY DATES: January 20, 27, 31
DJIA: 20,000 RESISTANCE/PIVOT
SPX: 2280 PIVOT
NASDAQ: 6250-6500 RESISTANCE?
GOLD: 1177 SUPPORT? R1 1200 R2 1225 R3 1250 R4 1300
SILVER: 16.50 PIVOT
OIL: 50 SUPPORT ITà$57+
US 10 year Distribute à 2.75-3.00 [RESISTANCE]
The Market Marker changed in December to some cautious concern.
2016 CLOSE: DJIA 19762 SPX 2238 & NASDAQ 5383
2015 CLOSE: DJIA 17425 SPX 2044 & NASDAQ 5007
2014 CLOSE: DJIA 17823 SPX 2058 & NASDAQ 4736
2013 CLOSE: DJIA 16576 SPX 1848 & NASDAQ 4178
AFUND Fair Value: GOLD $1370
THINK TRADITIONAL SWISS AND PRESERVE CAPITAL: FOCUS ON PROTECTING AGAINST DOWNSIDE RISK
This week we continue to stand aside except for special situations e.g. client Metalla Royalty & Streaming (MTA: CSE & EXCFF:OTCQB) which is currently breaking out to new highs thanks to a favorable combination of sector membership [precious metals], technical strength [momentum] as well as fundamental company progress. $.40C$ Support R1 .60C$ R2 .80C$ R3 $1.00C$
“We now have Venezuela, Turkey, India and China supporting gold among others with political risks in European countries like France, and Germany and of course Brexit worries(British deficits also) as well.”
George Gero, Managing Director, RBC Wealth Management
HW: Gold’s run up towards $1200 was a no-brainer. The question next is whether up to retest 1325 test quickly or [very] slowly? How much longer must we wait for gold to move significantly closer to Fair Value ($1370) January 28th? [Much] Later?? Gold remains cheap geopolitical crisis insurance. Moreover for investors still suffering from negative or miniscule interest rates, accumulating gold continues to be a no-brainer!
Sell offs are buying opportunities for longer term investors.
Likewise for investors who cannot or will not buy the $US currency as well as investors who wish to safely and cheaply hedge their US$ exposure, ONLY GOLD IS AS GOOD AS GOLD!
Gold FV $1370 = Commodity FV: 1325 + Currency FV: 1400 + Inflation Metal FV: 1355 + Crisis FV: 1400.
Gold/Silver ratio à 61 FV $22.50
NOTE: We remain disinclined to short or sell as INVESTORS until gold is overvalued e.g. $1400+.
For silver our first selling numbers are currently $23 to $25.
TRADERS: Going forward, we expect $1177 support to hold & bargain hunters buy into the [Chinese] New Year.
INVESTORS Intermediate Term, we plan to stay LONG in 2017 (recommending steady accumulation and only occasional hedging, selling or profit taking). While the strong US$ sent many traders looking to sweeter pastures elsewhere, I don’t plan to look this gift horse in the mouth! Note: For non-US denominated accounts, gold been a double win!
“Right now stock prices have probably gotten a little ahead of themselves.”
Brian Belski, chief investment strategist, BMO Capital Markets,
HW: What should it be different this time?
"It's quite expensive to go short the renminbi.,"
Colin Harte, multiasset portfolio manager, BNP Paribas Investment Partners
HW: Smart central bank!
“It’s about trying to figure out where the pendulum is, where it is about to go, and how far it can absolutely swing. The nuance of this move higher in interest rates is the most profound thing we’ve seen since 2008 in terms of what likely will be a shift in mentality.”
Andrea and Patrick Horan, portfolio managers, Agilith Capital
HW: Well past time IMHO.
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