Party for the Trump Rally Just Getting Started

Posted on Posted in Views From The Hill

Market Condition

daily technical analysis chart for SPY exchange traded fund
Click to enlarge

 


Commentary Analysis

Technicals

The SP-500 (SPY) has made 5 new consecutive highs since its breakout from a short-term period of consolidation. The trend remains bullish and has assumed a parabolic character by piercing through the resistance of its upper channel. At some point soon, I anticipate the SPY to pull back within its channel and consolidate support for these recent gains.

Momentum breadth for the 50 and 200 day moving averages ranges between 72% and 75%. While this is rather high and, from a contrarian perspective, suggests a potential correction, such moves typically do not occur until participation reaches the mid to upper 80’s percent range. In other words, there is still some slack in the market before becoming extremely overbought from a technical perspective.

 

Asset Classes

  • Since Trump’s presidential campaign victory, US equities have easily outperformed other regions, with the Russell-2000 (IWM) small-cap index leading the way.
  • In terms of sectors, Consumer Discretionary (XLY), Financials (XLF), Industrials (XLI), Materials (XLB) and Info-Technology (VGT) have delivered returns close to or better than 10%.
  • The VIX (VXX) has lost a whopping -84% thus far in the Trump rally and at such low levels offers an inexpensive hedge or speculative trading opportunity if one believes that market volatility has not completely disappeared.
  • Bonds, not surprisingly if you have been reading some of my reports, have been negative and particularly the Longer Term Treasury (TLT).
  • The US Dollar (UUP), DB Commodities (DBC) and US Oil (USO) appreciated in price, but this is unsustainable as commodities are priced in US Dollars and one of these assets must eventually cede to the other.
  • In Real Estate, Home Construction (ITB) was the third top percentage gainer and will probably continue to fare well with low unemployment and the prospect of further job growth under the Trump administration.

 

Fundamentals

Meanwhile, animal spirits are alive and betting on several growth catalysts, all of which are connected to the President Trump’s vision to make America Great Again (AGA). One of these is the continuation of the positive economic momentum that he inherited from the Obama administration, which is something that should not be highly discounted. To be fair, the POTUS is coming into office on 3rd base and has yet to hit a legitimate triple. Sorry folks, but inheritance does not equivocate to earning something the old fashioned way.

Despite all this, Trump is justifiably due all credit for this rally. Up to now, everything has been all oral-and-thumbs foreplay, but the market is ready for more stimulation and wants to be grabbed by a new fiscal policy that throbs on infrastructure. If you need something kinkier to get you off, then imagine Trump and Congress both going down on taxes for individuals and businesses while not expanding the national debt and still growing exports in the midst of a stronger dollar buttressed by protectionist trade policies.

 

Summary

Yep… Cocaine is a helluva drug and it can alter perception and inspire one to do some crazy shit. Pooty Face Russia and Sexy Rexy are in the house this time and the party is only getting started.  Enjoy the music, champagne and caviar and don’t worry about the mess afterwards. This party is especially catered to the 1% and they’ll be sending someone else to clean up when all is said and done. I imagine at that point any Americans who imbibed too much spiked Koolaid (sorry folks, but the champagne et al is reserved for the 1%) might find themselves waking up with a splitting headache and unable to explain why their pants have been pulled down to their ankles. Then again, that’s usually the way business cycles begin and end.

Good evening gentle readers and beautiful bastards alike from Hillbent …

 


ETF Trump Performance Rally

Exchange Traded Fund 11/8/2016 2/15/2017 % Chg
       
Equities      
DJ-30 Industrials (DIA) 182.47 206.38 11.59%
SP-500 (SPY) 212.86 234.92 9.39%
Nasdaq-100 (QQQ) 116.76 129.29 9.69%
Russell-2k (IWM) 118.39 139.59 15.19%
EAFE (EFA) 56.92 60.52 5.95%
Emerging Mkts (EEM) 37.05 38.69 4.24%
Europe FTSE (VGK) 46.68 49.89 6.43%
Latin America 40 (ILF) 31.15 32.28 3.50%
Brazil (EWZ) 37.07 40.04 7.42%
Japan (EWJ) 49.24 51.16 3.75%
Pacific Ex-Japan (EPP) 40.57 43.75 7.27%
FTSE China 25 (FXI) 36.89 38.82 4.97%
VIX Short-Term Futures (VXX) 32.18 17.41 -84.84%
       
Major Equity Sectors      
Consumer Discretionary (XLY) 78.36 86.77 9.69%
Consumer Staples (XLP) 52.31 54.12 3.34%
Energy (XLE) 68.96 73.37 6.01%
Financials (XLF) 19.90 24.52 18.84%
Healthcare (XLV) 68.07 73.66 7.59%
Industrials (XLI) 57.86 65.76 12.01%
Materials (XLB) 46.95 52.45 10.49%
Real Estate (XLRE) 30.13 31.18 3.37%
Technology / Info (VGT) 119.45 132.30 9.71%
Telecom (IYZ) 30.21 34.01 11.17%
Utilities (XLU) 48.70 49.05 0.71%
       
Bonds & Fixed Income      
20+ Yr Treasury (TLT) 129.21 118.96 -8.62%
Aggregate Bond Fund (AGG) 110.24 107.89 -2.18%
Treasury Inflation Protection (TIP) 115.38 113.90 -1.30%
Investop Corp Bond (LQD) 119.48 117.11 -2.02%
High Yield Corp Bond (HYG) 84.94 87.75 3.20%
Pimco Intermed Muni Bonds (MUNI) 53.86 52.60 -2.40%
High Yield Muni (HYD) 31.00 30.17 -2.75%
       
Currencies      
US Dollar Bullish (UUP) 25.34 26.10 2.91%
Euro Trust (FXE) 107.10 102.88 -4.10%
Japanese Yen Trust (FXY) 91.79 84.50 -8.63%
       
Commodities      
DB Commodity Index (DBC) 14.74 15.91 7.35%
Gold (GLD) 121.64 117.45 -3.57%
US Oil (USO) 10.10 11.36 11.09%
       
Real Estate      
DJ Real Estate (IYR) 74.57 78.28 4.74%
DJ Home Construction (ITB) 25.70 29.74 13.58%
Residential Real Estate Index (REZ) 60.30 61.66 2.21%

 

 

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