Frankly, it seems that the market is feeling the way I did after listening to our soon-to-be new president yesterday. I sat there with my jaw hanging open in amazement (and not in a good way). Now, I’ve already pissed off at least one subscriber and do not want to get into the personal aspects here. I note the above simply because it is the biggest macro issue in play right now and it appears the market is not taking kindly to the business man in chief.
In short, the honeymoon could be over as the idea of Trump starts to get superseded by the reality of Trump. I don’t want to try to come off like I know that his admin will be a failure. For all I know, pro-business policies may prove to be a boon to the economy for all the reasons the market knee-jerked over, post-election. But speaking from a sentiment point of view, if confidence starts to drain from the swamp, there is a lot of unhealthy over bullish sentiment that will need to be taken out.
I made a few moves that may seem obvious. The president-to-be uttered “Pharma” and “Healthcare” and ruined the short-term setups of the charts of PFE and JNJ. I sold them; no harm no foul because these are the financial markets and this is big boy time. No place for complaining. AMGN may be next out the door at a greatly reduced profit.
What I actually have tried to do is get cash levels up and get my regular (risk ‘on’) stock holdings in balance with my relatively risk ‘off’ holdings in long-term Treasury bonds and precious metals (not counting physical gold, which I seriously tend to forget about) and SPLV (low volatility ETF).
Here is the S&P 500 making a potential short-term double top. It has only faded to the daily EMA 20, which is no great shakes. But if it loses that then the December low needs to be watched closely. A failure there brings on the SMA 50. This would of course all come within the context of an ongoing uptrend in stocks that would remain intact all the way down to 2100. In other words, the market could get a pretty substantial correction and still be just fine. As a side note, I do not like the look of that daily MACD even one little bit. RSI is not any better.
I had thought that the Dow might hit 20,000 in conjunction with the inauguration amid rampantly over bullish sentiment; but maybe that would have been too easy a setup (in order to get bearish). In my opinion, if the market goes bearish now into and through the inauguration it could actually open up a more bullish view. This market needs a correction of the initial Trumpmania burst, after all.
The plan remains to be in balance (cash, risk ‘off’ and some risk ‘on’) until more signals come in. Beyond that, as noted of late, I’d be more than happy to go net short or net long, pending the market’s signals.
These are just some post-Trump thoughts. More to come as events unfold.
Final note: These in-day updates are a bit tricky because there is always the chance the market could decide to shake everybody out and reverse. So please take the above with a balanced approach.