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The Inger Letter- Gene Inger's Daily Briefing


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#1 OEXCHAOS

OEXCHAOS

    Mark S. Young

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Posted 07 February 2017 - 03:00 PM

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Gene Inger's Daily Briefing (highlights) - for Tuesday, Feb. 7, 2017      

 
Whistling past the graveyard - increasingly is a prevailing market view out there; as many technical analysts or pundits (calling for market decline for weeks or months now) are really chomping at the bit, almost 'in-protest', at the market's continued resilience. Technicals do not agree with them, yet; at the same time we are entering the zone we've identified as leading to some sort of pullback / correction (for two months I've said watch early-mid Feb.).

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This characteristic, which dovetails with our general view for weeks that risk would increase 'after' a post-Inauguration 'relief rally', is certainly logical and a perspective we're well-aware of. The behavior of not just Gold, but battles in intermediate Rates, currencies pr even Oil, leaves markets alternating in moves, while the rattling political (and social unrest) environments persist.

Oddly enough, we have argued (rightly) that the ubiquity of technical chart concerns is what holds the market together; with shorts perhaps made with reasonable logic, but inevitably run-in given absent institutional selling. That
'respect' for the inability to sell-off and knowing professionals don't sell stock bought so recently at this time of year, is why we've been unwilling to 'fade' (or short) this market, even though we can accept underlying assumptions as to missteps in Washington; higher price levels that justify correction; and concern about a loss of focus. (Other than that masking actual moves that get overlooked by financial media due to the fracas about other topics.)


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That loss of focus is the biggest concern. The distraction (more follows).

Discreet tax reform is needed for stock prices to grow into their price levels. It's a point I've repeatedly emphasized in the past two weeks despite being rightly skeptical of the market falling apart even in just a correction, just yet. (And yes I think we'll see all-time highs yet again in the hours just ahead.)

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In-sum: very little change in our assessment or the market action, which once again recovered 'some' towards days end. Short-interest perked-up again; and that helps defer the serious aspect of a coming correction. That is not the same as 'fresh' money coming-in; nor able to sustain strength in a sort of indefinite way. But we need a technical break that's still pending.   

The distractions and disruptions are exactly what we're most concerned for; and the key story might be a terminology lost on many: the replacement by House Speaker Ryan of the word 'reform' with the word 'relief' to describe a forthcoming tax proposal. Big difference; and potentially big meaning both to corporate earnings and citizens views about tax cuts 'retroactive' to January.

If 'repatriation' incentives are still provided to entice capital back to the USA, and jobs too; then things will be (as outlined in our overall tax discussion).

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Bottom-line: this matters a whole lot. A new Administration has typically the best prospects on whatever it introduces 'quickly' in the first 100 days. Now; perhaps it all happens, but (key point for ingerletter.com subscribers) and is exactly what we are concerned about.


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If it breaks, the media may talk about Russia; worry about the Middle East; or talk of immigration. Now all that matters; but for the market (which so far has generally minimized or ignored all of those issues, if you think about it) to not address 'tax reform' and 'repatriation' would be the classic focus error of taking their eye off the ball as the wrong time; when it has support. Take it into next year; and a midterm Election; and opposition would be enhanced.

Primary determinants now are: technical levels; oil prices; the Dollar; bonds of course; but also 'tax reform' as contrasted to 'tax relief'. Anything shy of a proposal that's retroactive to January 1 of 'this' year will be deleterious to a prospect for higher S&P prices near-term; and conceivably more than that.


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Stay tuned while realizing either way a correction is coming. I'm speaking to the extent and depth of decline. Ideally the market will recover a bit more on a daily basis; but (explored for members) For now respect market resilience (that unwittingly saw some technicians fight this all the way up).   
 

Monday (final) MarketCast
          
             3 o'clock (intraday) MarketCast             
 
Daily action - last week had me thinking the market was just faltering a bit, as the post-Inauguration relief rally faded, while expecting it to recover some each time; at the same time (probably) new highs again. Basically it was just coincidental I kidded about the 'Money Show in Florida' being a week late this year; so the correction might wait as well.
 
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So now we're in that week; and while the market's rebounding; it counts on Oil more than before, with serious nervousness creeping into almost each of the pundit viewpoints. That continues to allow recoveries; but not forever. At some point the market will correct more than we've seen, despite 'everyone' it seems in agreement (some fought this forecast upside thrust throughout).

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The distractions and disruptions are exactly what we're most concerned with but that's not the primary issue. That one is infrastructure Bills and tax acts, that comply mostly with the campaign-based expectations. We need to hear more about that, and less about the social issues (regardless how much of course they matter as well; but we just don't want the eye off economics).

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As to the excessive negativity among pundits: that's the fuel holding this up. And many bulls have become paranoid about the market dropping. But 'just because they are paranoid doesn't mean the gremlins aren't out to get them' of course. It's part of what makes this a feisty ongoing rolling skirmish.  

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Prior highlights follow: (redacted in fairness to actual subscribers).  
 

With that said, it's been great to be bullish for the wonderful upside thrust of the last three months. We've been persistently optimistic for the Nation, with a proviso that things kick-in with a deliberate and not reactionary tone, with regard to trade and immigration; while welcoming business reforms, tending to reinforce everyone's free world security, both financial and physical. Just for the moment the visual on that looks mixed; but Trump knows they sort of messed up the implementation of their policy changes.

It can be an exciting time; if the Administration will evolve from the knee-jerk confrontational start into a 'Teddy Roosevelt' era, more than reminiscent of 'Calvin Coolidge'. It's a work-in-progress, with investors just starting to sort 'fact' from mass illusion and delusion on both sides of the coin.  

 
Enjoy the trading week! 

Gene
 
Gene Inger
 

 


Mark S Young
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