Market Outlook for the Week of November 21st
Being the armchair general that I am, I think the markets are now in a situation similar to the 1939-40 ?Phony War? between Germany, Britain, and France (or ?Sitzkrieg? in German).
War was declared on September 3, 1940, but no actual fighting took place. Each side maneuvered troops, but not a shot was fired. The British dropped propaganda leaflets on German cities.
The phony war ended when Germany invaded Poland and Belgium on May 10, 1940, and subsequently overran France, with devastating consequences for the continent.
The financial markets are in a similar ?Phony War?.
We saw massive gaps up in what I call ?The New World Order? stocks of the financials, health care, commodities, and construction sectors.
Bonds and technology shares were mercilessly dumped in an ?ATM Effect? as investors sold their winners to reinvest in the rotational stocks.
No new money is coming into the stock market right now, and we probably won?t see any until next year.
Over the past two years, some $160 billion has been withdrawn from the stock market and moved into bonds or cash.
Will 2017 bring that money back in to take advantage of the vast expansion of tax cuts and deficit spending headed our way?
That will be the topic furiously debated by strategists in the weeks to come.
I am happy to say that I managed to navigate my readers successfully through the violence and the sturm und drang seen in the market in the aftermath of the November 8th election.
I swear to God, in the wee hours of Wednesday morning I called Mad Options Trader, Matt Buckley, and told him to buy the market when the S&P 500 (SPY) futures in Asia were trading down 800 points.
I knew they would open much higher.
I then spent the rest of the night thinking hard, cogitating, and plotting out a new roadmap for the Trump era. I managed to deliver my conclusions in a hastily put together webinar for followers at 12:00 PM EST on Wednesday.
It was my best attended webinar of the year.
It normally takes me two weeks to prepare a webinar such as that. This one took me three hours.
As soon as the index went positive the next morning, I sold everything I had and went 100% into cash, as I knew technology would quickly get slaughtered.
I sold my Facebook (FB) and short volatility (XIV) positions for a profit, and stopped out of Amazon (AMZN) for a small loss, disbelieving my good fortune. Amazon then collapsed an eye popping $70!
As a result, the long-term performance of my Trade Alert service has elevated to new all time highs almost every day during one of the most dramatic weeks in market history.
As of this morning, our six-year performance stands at 218.12%, giving us an average annual return of 36.35% since inception. We are up 26.21% so far in 2016.
The only way to stay in the business for a half century, as I have, is to be able to turn on a dime as I did last week.
Not many people can arrive at a totally new, groundbreaking investment thesis for the years ahead in a matter of hours.
Big hedge funds and institutions will be holding committee meetings over the consequences of the election for months.
This is why I do what I do.
While the earth is shaking, we still have the coming four days of economic data releases to deal with.
Monday, November 21st at 8:30 AM EST, we get the Chicago Fed National Activity Index, a weighted average of 85 monthly economic indicators.
On Tuesday, November 22nd at 10:00 AM EST we get a new update on the October Existing Home Sales.
On Wednesday, November 23rd we learn the Weekly Jobless Claims at 8:30 AM EST. Because of the national holiday the next day, the report is coming out a day earlier than usual.
Thursday, November 24th, all markets will be closed for Thanksgiving.
On Friday, November 25th, traders will be phoning it in, with only the ?B? team actually showing up for work.
At 9:45 AM EST we get the October PMI Services Flash, a survey of 400 US companies, and 1:00 PM delivers us the Baker Hughes Rig Count. No one will notice.
Keep in mind that virtually all economic indicators will be useless for the next two months, because they will only reflecting spending and investment conditions prior to the November 8th presidential election, and will be for a world that no longer exists.
Will the economy improve, reflecting new optimism of a pro business administration?
Or will it get worse, showing the rise of uncertainty pending a 180-degree change in US economic policies and a massive expansion of the national debt.
I think it depends on where you live.
We shall see.
With that, I?m keeping the letter short today so I can head off to the airport to host my Las Vegas Global Strategy Luncheon and attend the Traders Expo at Caesar?s Palace.
Wish me luck at the tables.
