2017 US and Global Financial Markets Overview.

1. Presented by S.S. Gosali
©March 2017
2017
Market Overview

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Disclaimer

3. • The bullish torch was passed from the end of Federal Reserve Quantitative Easing
(asset buying and stimulus to inflate the markets) to the hope of fiscal stimulus by
the new US administration under Donald Trump.
– Trump promised infrastructure spending, tax cuts, and less regulation.
– As of March 2017, nothing concrete was presented to the public.
– Markets tend to discount and buy based on rumors and sell on the news.
• Last year analysis that was based on Fed stimulus, which in general would put the
markets on a pause, switched regime to “Fiscal stimulus” that Chair Janet Yellen
was hoping.
• Markets had one of the best years with Dow hitting 21,000 and S&P500 hitting
2,400. Dow did have some 12-day winning streak closing higher that never
happened before in history.
• Questions remaining:
– Will Trump deliver what he promised?
– What will happen on March 15, 2017 debt ceiling deadline?
– Populism on the rise with Marine Le Pen leading the probability of winning France election.
– Buying Gold into these events can be a good trading idea.
Executive Summary

4. • 2 Major Events in 2016: Brexit and Trump surprise win.
• Market took about 1 week to recover the large drop
after Brexit: (S&P500 futures chart)
Interesting Analysis

5. • Finally, it took ONLY a few hours overnight for
market to recover 80 points S&P500 drop or 800
Dow futures points! (Large tail on the bar below)

6. What does it mean?
• There were large buyers with unlimited amount of money driving the
market up overnight after election.
– Only central bank type buyers or coordinated large funds could do such
thing.
– Might sound like a conspiracy theory, but after 2008 crash, we can feel that
there are invincible hands out there that acts as “Plunge protection” team.
– The “cheapest” and easiest method to prop up and manipulate the markets
is by buying Equity futures, such as S&P500 emini futures or Dow.
• With global markets are more correlated than ever, one push in futures
market can easily drive the computer algorithms to buy a basket of
S&P500 stocks and ETFs, for example.
• CME which is the exchange for S&P500 futures basically protects the
organization names who buy and sell. And, they do give discounts for
central banks to buy/sell.
http://www.cmegroup.com/company/membership/international-
incentives.html
• Will not be surprised if the like of Swiss central bank and Bank of Japan
are propping the US markets. Swiss National Bank is known for holding
US stocks. BoJ is also known for buying ETFs and equities.

7. Daily S&P500
• Since the election, there have been massive buying in the broad markets. S&P500 is up
14% and Dow is breaking 21,000.
• Some of the up move were accompanied with US dollar up move – which can caused by
foreign buyers buying up US equities. Many up move were overnight gap ups, which
adds proof to this theory.
•The record inflow of SPY
(S&P500 ETF) on early March is
an indication that huge retail
investors and fund managers
bought the ETF.
• Similar observation in DIA
(Dow ETF).
• Reversal red bar after that.
•This indicates a short-term
top. However, need to wait for
more selling to happen to
panic the bulls that have not
seen a pull-back for a long
time. (Ambush).

8. Results from LastYear
Analysis

9. The Death of Wearable Bubbles – GoPro (GPRO)
• Classic bubble chart with tons of retail investors in the hype.
• Hardware company with too high of valuation.
•Wearable device was a hot topic and was expecting it to die off. Correctly predicted.
•Wearable term is not something in the discussion anymore in 2017.

10. FITBIT – Overrated wearable hardware company
• Dropped from $30 to $6.07.
• One of the best shorts of 2015-2016: hardware company with too high of
valuation. Many retail traders were invested in this. Classic bubble chart.

11. Strategy for the rest of the year (2017)
• We are not suggesting to short the market.
– Fundamentals are still strong.
• ISM and Consumer confidence numbers are trending up and
indicating an expansion of GDP, which means bullish for
stocks.
• Charts indicate trend is still up and price action is going
higher.
– We might be in the last leg of the bull market.
– Waiting for the last blow-off top that indicates everyone is in and
there will be no more buyer left. Usually, it accompanies
correction, either a shallow one or deep one.
– As people are very bullish, market is usually primed for
correction.
– Use correction for buying opportunity. Index ETFs and leveraged
ETFs are good choice, rather than be a stock picker.
• Hedge the long with selective shorts.

12. Selective Shorts of 2017
• NVDA (Nvidia)
– Hyped to be a leader in Machine Learning and Artificial Intelligence chip supplier.
– Bubble-like chart. Up from $20 to as high as $120 in a year and half !
• Notice the over-hyped term:
• “Machine Learning” and “AI”
• Similar to wearable in 2015-2016.
•Yet, nobody knows when the market
will take off (self-driving cars, etc)
• Buy the hype, sell the facts.
• NVIDIA dropped at last earning. (sell
the facts)
• Look to reach back down to $40 to
$60 or even lower.

13. NVDA
• Daily chart: double top rejection with sharp drops.
Indicating a possible top.

14. AMD – short idea no. 2
• AMD has gone up from low $2 to $15 !
• All due to the hype that they will deliver a new desktop chip
• Dropped with high volume at the announcement last week. Notice the super high volume
red candle bar indicating huge selling on top.
• There is a chance for this stock to
go back up and forming a nice
double top as in NVDA.
• Nice target will be around $7 or
even lower in the long term.