Sell in May and go away?

Short term, is there a reason to buy or sell stocks? Certainly not until we see

• Aftermath (if any) of Sunday’s French Elections & other potential geopolitical swans
• Trump’s Wednesday Tax reform proposals coupled with
• Wall Street gears up for busiest earnings week in years

MARKETS ARE OVERVALUED BUT OPPORTUNITIES REMAIN

We are watching earnings and outlooks vs. elevated Geopolitical concerns.

The odds are markets will stay strong.  I am inclined to favor the belief we will see a retest of DJIA 21K before 20K.  However, only Trump knows for sure which way- Up or Down - is next!

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. 

1.      TECHNICALLY, this week watch KEY SP MARKET PIVOT 2328.

Downside potential is DJ 20000 or 19762/SP 2238 [12/31 market close]. 

BOTTOM LINE: As long as markets stay above SP 2328, 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.

Additionally, short term trading and conservative hedging strategies (such as writing covered calls and 2-1 long/short ratios) are recommended for Spring as long as the SP is above 2328.  Below SP 2328 and up past SP 2400 1-1, and if markets are so inclined to move still higher up towards 2500, then 1-2.

• HYDE PARK SOAPBOX: ETFs seen creating market that’s both mindless and too expensive

2016 CLOSE	19762	2238	5383	15.96	1152	53.89
4/21/2017	20547	2348	5910	18	1286	49.53
PIVOTS	20500	2328	5800	18	1274	50
RESISTANCE	20800	2400	6250	20	1300	53

 

KEY DATES:     APRIL 28, MAY 1, 3, 10

DJIA:                    20500 PIVOT 

SPX:                     2328 PIVOT   
NASDAQ:           R1 6000 R2 6250 R3 6500
GOLD:                 1274 PIVOT   R1 1288  R2 1300 R3 1325

SILVER:              18 PIVOT

OIL:                      50 PIVOT R1 53  R2 55  R3 57  ITà$57+  

US 10 year         Sell 2.30 OB/Short 2.26 OB  à 2.75-3.00 [RESISTANCE]        

BP:                        125 PIVOT IT à  1.31+                        

 

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. Given we are uncertain about the short-term direction of the market,  we plan no fresh investments this coming week.

NEW POSITIONAL TRADE: US 10 yr Bonds remain within our Shorting Zone (<2.26) and we advised doubling up last week ~2.20, but NOTE this risk is well hedged by long gold positions.

 

3.There are too many bulls to make any money on gold

4. HW: I disagree. There are NOT enough Bulls for my taste! 

As both a trader and investor, I wish to continue be long both Gold and Silver in Q2 2017.

Silver may soon attack $20; Gold has likely found $1250 support and can finally attack the short stops above $1300.  Hence we continue to believe Gold can move significantly closer to Fair Value ($1380) in Q2 2017.  Beyond some positive, astro, we see:

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+. 

 

“Love him or hate him, there's one thing that President Donald Trump has done since he took over the White House, and that's create a lot more uncertainty around the world. And this is great for precious metal prices.”

 Michael Lombardi, editor, The Lombardi Letter

HW: This is music to my ears (and pocketbook).

"The 50-day moving average is the line of demarcation for this bifurcated market. The longer the indexes stay below the 50-day moving average, the more negative the outlook gets."

Adam Sarhan, CEO, 50 Park Investments

HW: Simple or exponential moving average? 

"It will not take much before we see headlines about floating storage starting to increase again.

Olivier Jakob, head of oil consultant, PetroMatrix GmbH

HW: As a cosmic contrarian and given Oil is not far from the bottom of our projected trading, this could be a BUY signal for us!