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Friday 30 December 2016

Goodbye to 2016

It's been an interesting year on equities this year, with plenty of thrills and spills, and with some extremely dull periods where volatility almost vanished. Not the easiest year to trade, but generally something interesting happening, even if that was only a record-challenging period of very little volatility like the one we saw in the summer.

There were some big surprises over the year. the UK voted to leave the EU unexpectedly and the expected equities meltdown that the financial news had been talking about endlessly only lasted a couple of days. Donald Trump won the Presidency unexpectedly, and the expected meltdown that the financial news had been talking about endlessly only lasted a couple of hours. What did this mean? Mainly that watching the financial news is generally a waste of time, but most of us already knew that.

My January stat system called another flat to down year this year and we didn't see that. The closing print of 2015 was 2043.94 and while there was a bit of leeway of up to 3% up on the year, that only extended the target window to 2105. Depending where SPX lands at the close today the 10% rise target at 2248.33 is definitely within range, though the AM action so far isn't that encouraging for longs today. This is the first fail on this stat in 44 years, but it was also the first signal to fix the year after another signal so maybe that was it. As with any statistic though, the track record only remains perfect until you reach the first exception. In markets and trading there is really very little certainty, and what little there is is mainly the (almost) certain knowledge that anyone promising certainty is a fool or a fraud, or both (generally a politician in that case :-).

Coming into the open today the prospects for today were looking decent for bulls, with a perfect bull flag channel formed on ES and a decent looking (bullish leaning) triangle on TF. The support trendlines for both died shortly after the RTH open though, which is not promising for bulls next week. Those support breaks haven't followed through so far today, but they may well follow through next week. The next obvious target areas below on ES are the 2225 then 2215 areas, and on TF the next obvious support is possible full flag channel support there, currently in the 1340 area. ES Mar 6omin chart:
NQ has broken 4900 area support at the open and has gone deep enough to fail the fixed 60min buy signal there. NQ Mar 60min chart:
TF retested the three week low at 1352.50 on the opening move and that's still holding so far. TF Mar 60min chart:
On the last trading day off the year volume is low, interest is low, and after the first couple of hours volatility is apt to just dry up and blow away for lack of interest. Were these trendline breaks still significant regardless? Yes. Will ES & TF follow through hard today? Probably not. Little of interest has happened since the breaks and I won't be holding my breath this afternoon waiting for fireworks.

I'm going to leave you with a thought-provoking proposal for boosting the US economy attributed to Marc Faber, author of the Gloom, Boom and Doom Report.
Could this be what Trump has in mind to revitalise the US economy in 2017? I've certainly heard worse proposals over the last ten years. It reminds me of the reply that George Best, a famous UK football player once made in response to a question asking what had happened to all the money he had made in his career. He replied that he'd spent a lot of money on drink, women and fast cars, but had just squandered the rest. A great english wit who has been sadly missed since his death from liver failure in 2005.

I'm working on a post I'm hoping to have out this weekend. I'll be posting the link on my twitter. Everyone have a Happy New Year and my next daily post here will be on Tuesday morning.

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