Markets continue to stay strong in May

1. WE DO NOT PLAN TO SELL IN MAY AND GO AWAY!!

That is, not until past Trump’s birthday June 14th.  Until then we see markets range bound with an upward bias.  The question for me is what is the range: DJ 20,000 to 21,000 or 20,500-21,500? The latter remains our current bet and facilitated profitable trades last week:

We again recommended shorting US Bonds ~2.20 Gold dual pivots 1250 (lock in ST trades) & 1265.

As per WSNW we like the R/R of buying calls today as a trade circa 20,500 DJ Testing &/or MOC if markets not stable by tomorrow will cover.

MARKETS ARE OVERVALUED BUT…

The tug of war between earnings and outlooks vs. elevated Geopolitical concerns continue to suggest the odds are markets will stay strong in May. 

FUNDAMENTALLY while we see MARKETS OVERPRICED by 10%+, given future increasing profits for many companies, and the prospect of lower taxes and less regulation, IT SHOULD BECOME LESS OVERVALUED AS TIME PASSES. 

TECHNICALLY, we saw the DJIA test the bottom of our projected trading range last week ~20,500.

As long as markets stay above SP 2366, technically we are inclined to maintain a long basis. Nonetheless, we always advise caution, and believe stock picking will easily well outperform index investing in 2017.

We recommend short term trading and conservative hedging such as writing covered calls and long/short strategies this Spring.

In May we adjusted our Long Short Ratio to 3-2 [from 2-1] as long as the SP is above 2366; Below SP 2366 and up past SP 2420 1-1;

If markets are so inclined to move still higher up circa 2500, then 1-2.

KEY DATES:     MAY 26

DJIA:                   20800 PIVOT 

SPX:                    2366 PIVOT   2440 RESISTANCE
NASDAQ:          6000 SUPPORT R1 6250 R2 6500 R3 7000
GOLD:                 1250 PIVOT   R1 1265  R2 1280 R3 1300

SILVER:              16 SUPPORT 18 RESISTANCE

OIL:                      50 PIVOT  ITà$57+  

US 10 year         2.30 PIVOT à 2.75-3.00 [RESISTANCE]        

The Market Marker includes 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 $1380
THINK TRADITIONAL SWISS AND PRESERVE CAPITAL: HEDGE AND PROTECT AGAINST DOWNSIDE RISK+

2. Here are Wall Street’s favorite stocks for a rebound in oil-company earnings

Until June 14, we have no plans for fresh buying or selling, although if required, we are more likely to continue to (trading) buy any dips, vs. selling any rallies.

3. An unexpected change in gold’s seasonal trading pattern

Has Gold and Silver has peaked for 2017?  While traditional seasonal weakness lies ahead, we continue to position on the long side in both Gold and Silver in Q2 2017.

Silver should have found support at $16 and gold at $1225.  However Q3 will be telling and precious metals could move in either direction over the summer.  Regardless:

• Gold remains cheap geopolitical crisis insurance.
• For investors suffering from minuscule interest rates, accumulating gold is a no-brainer! 
• 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 $1380 = Commodity FV: 1325 + Currency FV: 1400 + Inflation Metal FV:1375 + Crisis FV: 1420.

Gold/Silver ratio à 61  FV $22.50

INVESTORS: Intermediate Term, we plan to stay LONG in H1 2017 (recommending steady accumulation and only occasional hedging, selling or profit taking).  We remain disinclined to short or sell until gold is overvalued e.g. $1400+.

For silver our first selling numbers are $23+.

4. “The S&P 500 has taken an average of only two months to recover from pullbacks and just four months to get back to break-even after corrections. So we continue to believe it would be better to buy than to bail.”

Sam Stovall, chief investment strategist, CFRA

HW: We agree but suggest downside protection especially later this summer.

“Prices aren’t at all justified by valuations or economic data. Wall Street can still rise over the coming days or even months, but I think you’re taking a lot of risk by staying in the S&P 500. In general, U.S. stocks are unattractive, though there are some idiosyncratic value opportunities within the market.”

Adam Strauss, portfolio manager, Appleseed Fund

HW: One can substantially reduce risk by appropriate hedging as well as just buying cosmic value.

"In the markets, what we've seen, and what I think we will see going forward, is you sell the rumor, then you buy when they refute the rumor, and we'll have that kind of back-and-forth going for some time."

Keith Bliss, senior vice president, Cuttone & Company

HW: I thought it was “buy the rumor, sell the news.” Anyway. I agree as to the markets are in a trading range.