The Trump rally reached a short term overbought around mid-month. Since then, the SPX has
been correcting and has moved down to a neutral on a momentum basis although RSI and MACD
are declining. The pattern of the market's rally since early 2016 has been one of a sharp up move
followed by an extended topping process and completed by corrective action down to test the
200 day m/a. SPX Daily
If the pattern holds suit, it may be early in the "topping" process, but the corrective phase likely
would not run its course until the first couple months of the new year are completed. In this scenario,
the Trump plans for the economy would hit a bump as market players assess how truly likely it
is to pass muster with the Congress and, encompass another Fed policy meeting as well.
But, just as history shows stock market patterns change, so might this one as well, with the
opening weeks of 2017 to tell the tale. Given the period of political testing that surely lies ahead,
I merely suggest that you keep continuation of the 2016 rally pattern in mind.
And speaking of politics, the Trump crew will be facing another issue. Pushing the economy to
grow faster in the shorter term when it is already well along in employment and when signs of
faster inflation are evident invite an eventual economic overheating and possible subsequent
recession that, depending on timing, could be politically damaging to The Donald's re-election
chances. If instead, the new administration acts in a leisurely fashion and allows for a degree
of disappointed expectations to take hold in the economy and the stock market in 2017, he
might wind up in better shape in 2020, should he choose to run again. Believe me, this
discussion will take place if it has not already concluded.
- Peter Richardson
- Retired chief investment officer and former NYSE firm partner with 50 plus years experience in field as analyst / economist, portfolio manager / trader, and CIO who has superb track record with multi $billion equities and fixed income portfolios. Advanced degrees, CFA. Having done much professional writing as a young guy, I now have a cryptic style. 40 years down on and around The Street confirms: CAVEAT EMPTOR IN SPADES !!!