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Friday, November 11, 2016

Daily update 11/11 Private Capital Allocation Matching Only the Great Depression for Inefficiency

A salute to all who have served to keep us safe.  I understand the sacrifices you and your families make.  It is greatly appreciated and I sincerely hope President-Elect Trump makes good on his promise to clean up the VA.  You deserve it. 

No upside progress today.  Volume was pretty heavy, but well lower then the last two days.  The rotation continued.  Breadth was +52%.  New highs slipped a bit to 212.  New lows rose a bit to 175.  I looked through the low list and found a lot of bond related items in there.  Oddly I noticed KO was in there as well.  I wonder if people are going to need something a little harder then soda under the new president.  High volume at lows is good, high volume at highs (except on a break out) not so much.  So we will see what happens.

The futures did not stay above the line, but have not been rejected as of yet.  Odd looking chart.

The green count slipped a bit today.  Still nowhere near overbought.  But then again the red count was not oversold when the rally began.  Lets take a peek at the weekly chart.

At the brexit low there was a negative cross, but the red count was still very low.  In our current situation the red count was pretty high and remains above the green line after this first week of the rally.  This does not mean the market won't go higher, but we certainly have different conditions.  Remember the long term bull pressure lines have had a negative cross for weeks and were positively crossed at the brexit low.

This is a curious situation.  Some people bordered on euphoria today.  Apparently Trump went from a pariah to savior of the Wall Street world by winning.  I heard some skepticism from a couple of people it was not all bull all the time.  Lets take a step back and take an honest look.  The first two days of this rally were people wanting to get long in front of the election for the big rally that was going to happen after Hillary won.  In no way shape or form was that move because Trump was going to win.  The day after the election when the market did not crash the hedges came off which caused more upside.  The last two days have been portfolio adjustment.  People sold Hillary stocks to buy Trump stocks.  The net effect for SPX was neutral.  Small caps stocks did well based on Trump's promise to lower regulations on them.  I heard somebody say they thought the adjustment was about 80% done.  With all the volume I can believe that could be true.  At any rate it should not take too much longer.  Once complete the market will go find something else to obsess about.  Maybe part of that obsession will be to notice that the dollar and rates are rising while oil is falling.  None of that is good for stocks.  Even if Trump was the greatest president in history nothing he does will affect earnings and the economy for quite some time.  Much longer then the market's attention span.  The reality is the consumer is slowing.  Auto production is being reduced.  That in itself could cause a recession.  I have been saying for quite some time the next president is almost guaranteed to be dealing with a recession.  That may be right away.  Don't be fooled by the latest GDP data.  Much better realtime data shows the economy is still weak.  I am still quite suspicious that all this new found optimism is misplaced.  I think the market is more likely to turn down then break out and go up. 

I don't like to do predictions on the market.  They are mostly useless.  If you are going to do them then you need to make a lot of them so you can point to the few you got right and pretend to be a genius.  However, in other things in life I can glean enough information to make decent predictions pretty often.  I told my friends and family Trump was going to be the next well more then a year ago.  After Obama spoke at the 2004 convention I told my wife he would likely be president some day.  I expected it to take longer then four years though.  I think I have enough information to make a prediction about the next president.  I predict two years from now many people will be shocked to find out he can act normal and "presidential".  I predict many people will be shocked to find out he is not a racist.  I think everybody knows he has a huge ego.  He spent the last 40 years being outrageous to get media attention to feed that ego.  However, as president being outrageous works against you.  As president he will be in the news constantly and will not need an "ego fix".  He has already pivoted to presidential mode to the shock of many.  However, they are all just waiting for him to slip back into what they perceive to be his true self.  I don't think he will have any trouble staying in presidential mode.  Whether he will be a good president or absolutely terrible I cannot say yet.  I like his decision to put Pence in charge of the transition team.  He seems like a very thoughtful individual and the proverbial good man.  I expect Trump's big ego will drive him to try to be a great president.  What really makes or breaks a president is the people they surround themselves with.  In that task I think both Bush 2 and Obama did a poor job and it greatly affected there terms in office.  If Trump gets the right people in the right job he might be able to accomplish some good things.  However, keep in mind he will likely be facing a recession in the near future which could become another global economic crisis.  That will limit what he can get done.  I don't agree with some of the things he promised while campaigning.  Some could do more harm then good.  Since politicians rarely do what they say during the campaign it is possible none of those things actually happen.  It is impossible to say.  That all goes back to depending on the people he has around him.

This is a very interesting article with lots of charts.  It might take some time to digest if you don't look at a lot of economic data, but it is well written so I think it is worth a few minutes of your time.
Private Capital Allocation Matching Only the Great Depression for Inefficiency

Have a great weekend.


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