Shorts Fighting Uptrend - Market Update For November 28

Shorts are continuing to fight this uptrend and continued to get 'stuffed' as we progress to and slightly over the S&P 2200 level, just as projected to be achieved going into the Thanksgiving recess. We thought the odds were for an 'absence of offers' allowing incremental bids to hold this up.

We give thanks for the vision our leaders 'seem' to have; to unite rather than divide; for a result that changed the overall dynamic of this market instantly on Election Night; and for a nervous world that increasingly is coming to realize this isn't the panacea some might wish; while at the same time neither was the predicament global central bankers got most of the Industrialized world too deeply into (including the U.S. Fed, BoJ, ECB, even the Chinese); nor does it harbor the risks pursuing the same 'gasoline on a fire' approach that the Keynesian globalists advocated. 

Sure, we will likely see deficits and spending that look very Keynesian in a sense, but the aim of the funding will be infrastructure and financial as well as security for the American people. That changes the tone of how it is all perceived; and conceivably (after some roiling we'll outline over the months ahead) thrusts the market to incredibly higher levels, as we find potential in many new sectors, plus some suppressed for years. 

If one wants an argument for 25,000 on the Dow or higher in time, that new dynamic is how you set the stage. First though, you exhaust excess short-term euphoria; come to grips with how tough it will be to initiate at least some of the plans and the 'process' by which the market can start the next phase of discounting the future (the first phase started at night, as the Congressional as well as White House results were known). 

Yes, in the past most of the significant economic expansions occurred in times of Democratic Administrations historically (but not always). And of course it's not being said often but in a sense what we have now might just be essentially a 'conservative Democrat' President-Elect (even the former Speaker of the House says he's barely a Republican or 'almost' a Democrat). 

While we have numbers like Dow Industrials 25,000 in our mind eventually; that has nothing to do with 2017 by the way. We know there are bears calling for disaster and bulls calling for moonshots. We will stay with this as a process, that leads to exhaustion and retracing; as well as a probable year-end rally. So yes, we agree that more signs of a near-term peak are provided as you hear Dow 30,000 or even 50,000 (that part is absurd). And we know how tough the global challenges, not the least of which is debt and demographics, can be over time. 

What I'm saying is that the dynamics changed immediately as the focus shifted to how constructive we can be and go forward. The irony is that the other approach (which claimed we were great and building on it) for sure advocated more of the same which meant slow growth at best. It will still be slow but with a tax structure and enthusiastic base that has at least the potential to inspire and reinvigorate the Country.

It's an emphasis that we're likely to get to a new prosperity and a higher Dow Industrial level of significance, by a Southern route. I compare it a bit like flying from LAX to the (new?) Capitol City served by JFK (a bit of humor) with a refueling stop at PBI (Palm Beach International). 

There's that 'toy' of the Fed Funds rate; and boy are they relieved that the Federal Reserve now has 'cover' to bump rates without tumults that crack the market. There is no other way they could have this; whether it all promises the biggest bubble we've ever had or not. I totally recognize the perspective of this setting up a bubble; and fully intend 'harvesting' the recent long-side gains (for those that managed to slip in at a point). 

The addiction to low interest rates may not allow an elevation to higher levels beyond what the Fed's going to do with clear sailing that's not at all disruptive to policy or business. It sure isn't benign to credit markets.

Short durations will dominate the credit markets; while in stocks valuations are getting up to historically toppy levels that suck in late-phase buyers and probably set-up up an huge up and down turn. 
 

The point remains that the ensuing 'purge' likely won't go as low or stay as low as otherwise would be the case. So no Dow 25,000 for now but over the years after we bottom. If the market gets ahead of the curve in advance of the Fed, while the Fed's relieved; the irony is that the market is (as I've contended for some time) in control more than the Fed. They are relieved now; but may regret it later. 

The big numbers for the Industrials 'down the road' relate to stocks that are (and will) essentially 'come back from the dead' and that includes a slew of 'dividend paying' stocks that attracted yield-chasers for so long. 

All that, when combined with innovation, technology and (heavy lifters of the digital era) will join infrastructure stocks (and even an eventual new rally in drugs and biotech when it's realized that reforming price trends won't go as far as trimming healthcare proponents dream) generating a potentially healthy mix that propels things to incredible heights; but once more pointing out, not in a straight line. Might even get something quite bearish in between; but given optimism for the future, it might be what used to be called a healthy correction (more than a pause to refresh); at the same time as it avoids becoming a depressing debacle such as we rightly assessed on the horizon almost a decade ago.