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Market Analysis - Kira Brecht
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Will The Trump Stock Rally Continue In 2017?

(Kitco News) - Stock investors were heartened by the post-presidential election rally in the S&P 500 of just over 9%. Going forward, the key question for 2017 is can the uptrend continue or has the market already priced in the good news.

The bad news: the current rising bull cycle in U.S. equities is long in the tooth. The current bull cycle began in March 2009 and will soon hit its eighth birthday –that's old for a stock bull. Also, Wall Street analysts are warning that stocks are overvalued –the price/earnings ratio on the S&P is near the highs seen just before the bubble burst in 2000.

The good news: A lot of the good news has already been priced into the stock market –during the recent rally wave. The 9% gains since the election are pricing in expectations for deregulation, tax cuts and infrastructure spending that will boost the economy. That's means Washington has a lot to deliver on these pro-growth ideas over the next year or two.

Watch the Hill: Over the next few months the level of cooperation that emerges between the two major parties will be critical. Will the new President-elect's proposals pass swiftly and quickly? The stock market may cheer at that. On the other hand, if partisan politics continue to stall progress and the gridlock continues the stock market may be vulnerable to a fall.

Stock Cheat Sheet
The January Barometer and the First Five Days early warning system devised by the have an admirable record in predicting stock market performance for the year.

The January Barometer simply states: as the S&P 500 goes in January, so the goes the year. If the S&P 500 is up at the end of January it forecasts gains in the stock market for the year overall.

It is reliable. "When January is up, the year is up 80% of the time with an average gain of 13.0% and February-December is up 78% of the time with an average rise of 8.6%," according to a BofA Merrill Lynch Global Research report.

Can't wait 'til the end of January? The first five session's indicator uses the price return of the first five trading sessions of 2017 as a gauge for the year. "Data back to 1928 suggest that the S&P 500 does better than average for the year and February-December when the first five days are up and worse when the first five days are down," according to a BofA Merrill Lynch Global Research report.

What It Means For Gold?
Gold prices have stumbled hard since the presidential election falling sharply in a risk-off sell-off. A short-term floor has formed at the $1,124 an ounce zone for Comex February gold futures. But, the recent gains may prove to be short-lived.

Gold has "corrected" higher over the last few weeks, but the rally may not stick. If stocks continue to surge higher early in 2017, gold is vulnerable to a fresh bout of selling.

On the downside, strong chart support is seen on the weekly continuation chart for Comex gold futures at the December 2015 low at $1,046.20. That zone will act as a major support floor and critical test for the gold bulls/bears. Physical buyers emerged at the level in 2015 to support and accumulate gold for long-term investment.  

Patience – Better Long-Term Buy Spots for Gold May Lie Ahead
If stocks turn down at some point in the first quarter as reality sets in, the timing could coincide with a test of that major support floor in gold.

The $1,040 zone is the level for long-term physical gold buyers to circle on their charts. Patience rewards those who wait. If you are looking for a good level to accumulate or add to your long-term bullion position –you may need to wait a little longer.

By Kira Brecht,



Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
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