Market Update/”Make America Great Again”
December 27, 2016
Agriculture and PM miners are two of the most undervalued assets in the world. My belief was, and is, for 2016 being the secular low in commodities, with retests later in 2016, and early 2017. Base metals bottomed earlier than I expected, and they recently got way overdone on the upside, for now. Late last year the deflation forever crowd believed there would be no end in sight to the commodity bear market. And now the recent selling in base metals is “proof” the Trump reflation trade is over. Donald had nothing to do with my belief in a secular bottom for both commodities and inflation in 2016, and he still doesn’t. But, per usual, he came along when the trend was already set in motion – almost like a “confirmation”. Increasing inflation doesn’t move up in a straight line, nor do markets. The selling will set them up well for another opportunty again next year. There is a large accumulation area currently in agriculture. In general they have been trading in broad ranges for decades, with some very large spikes in 2008 (and again in 2011/12), but then having huge selloffs back into their long term ranges. There is great potential there, when bought into weakness.
The sentiment right now currently in the stock market is interesting. On one side, some sentiment indicators are at multi year, or more, levels of bullishness. And some very popular websites which for years have been completely geared around crashes in the economy, the US$, and the stock market are now bullish on all three. Of course, it’s all “because” of the new President coming in – truly amazing to watch. Yet, you also have plenty of people who believe the stock market is a bubble and is about to crash, which for years has not been my view and still isn’t. And these people appear to be digging in even more, as the market has gone higher. Is it not possible to have a “normal” selloff, possibly a big selloff, in a secular bull market? Why does everything have to be a crash? But on an investment basis certainly, this is a horrible entry point into the stock market. There is just too much risk/greed for new money into the market. So for me, it’s just a trading market, as there are actual investment opportunities elsewhere. And for all of the people who believe in the “new” Trump bull market, here is an SPX chart around the inauguration of the original “Make America Great Again” President, Ronald Reagan. The post-election high was on 11/26/80, which was followed by a quick and scary two week selloff of 12%. This was followed by a quick rebound to a secondary high/retest on 1/6/81 and then some more retesting over the next few months. The cyclical bear market low, within the huge secular bull market, was on 8/10/82 after having fallen 28%. So the speculative (weak handed) money flow in to the stock market with the “Make America Great Again” euphoria, became a twenty one month bear market (not crash) and speculative money flow out of the stock market. It’s wise to keep this in mind. There are great times to buy, and there are lousy times to buy. Next year, the bank derivative problems will become a bigger problem for the stock market, and a more bullish background for PMs.
Trader Scott has been involved with markets for over twenty years. Initially he was an individual floor trader and member of the Midwest Stock Exchange, which then led to a much better opportunity at the Chicago Board Options Exchange. By his early 30’s, he had become very successful in markets, but a health situation caused him to back away from the grind of being a full time floor trader. During this time away from markets, Scott was completely focused on educating himself about true overall health and natural healing which remains a passion to this day. Scott returned to markets over fifteen years ago where he continues as an independent trader.