Time to dump the Trump Bump? asks Zak Mir


Posted on Jan 31, 2017

Having been a keen markets watcher and occasional trader for all but the first seven years of a 50 years existence, there is little that shocks or surprises. Indeed, there is normally an analogous event or occurrence that one can compare and then leverage off.

(Photo by Shawn Thew-Pool/Getty Images)

Even if there is not, there are the many stock market adages to go by. For instance, The January Effect, or “buy the rumour, sell the news.”

Indeed, the latter saying looks to be appropriate regarding the incredible rally since early November for equity markets.

For instance, selling out the news of President Trump being inaugurated would have been correct not only to message of “sell the news” it was also factoring in the knowledge that Mr Trump is something of a loose cannon.

But the surprise here – the surprises keep coming, is that is his literally doing what he said he was going to do, to the letter. Rather than considering the first 100 days, the issue now is in the wake of the firing of the Attorney General in the wake of the travel ban, is ironically whether the man can last that long!

In fact, we are looking at that classic phrase, “hoisted by his own petard” as the one which currently fits best the Trump situation. The question now is whether the momentum the mainstream media are keen on building against the President can prove to be dangerous to his Presidency?

The answer may be found in the relative strength of the U.S. Dollar and the equity markets, as well of course as Gold. Indeed, the buy the rumour/sell news did look to be operational in the run up to January 20th for the greenback and stocks – with Dow 20,000 being the icing on the cake.

However, for Gold – where there could ironically be the best opportunity, the situation is somewhat more complex. Nevertheless, anyone who was awake for the $50 overnight rise on election night in November would remember that the knee-jerk reaction of buying fear and buying the yellow metal.

Now that the worst fears of some, Trump using executive orders to do what he said in his manifesto, could make Gold the low hanging fruit of the moment. Technically, a break of the recent $1,220 peak could unlock a sharp really to retest the aforementioned November peak level which was $1,337.

Moving closer to home in the UK, and some stock highlights here, there may be a couple of special situations to focus on. The first is online supermarket Ocado (OCDO) in the wake of the splash made by Tesco’s (TSCO) swoop on Booker (BOK).

According to Alan Green, CEO at Brand Communications: “Ocado continues to confound its critics and army of short sellers. Despite the presence of the ‘elephant in the room’, namely Amazon (AMZN), Ocado continues to win awards and deliver gravity defying results. “

Green continues: “With full year pre-tax profits up 22% and sales up 13%, the group were also waxing lyrical about their new online beauty offering, Fabled. Clearly, Ocado do have a plan B in case Amazon move into the UK online grocery delivery sector and sweep all before it. Significantly, Ocado shares have bounced sharply regaining their 50 day moving average at 260p.”

Finally, for those who are hooked on volume statistics in stocks, it may be worth adding security group G4S (G4S) to the watchlist on the basis that the shares have been the subject of possible M&A moves, and are serving up a break to new 52-week highs.

Zak Mir is is the author of chart topping books, including 101 Charts For Trading Success and 49 Golden Rules of Technical Analysis, and is generally acknowledged as being one of the most experienced independent technical analysts in the UK.

Disclaimer: The content on this page does not constitute financial advice and is provided for general information purposes only.  Nothing on this page should be regarded as an offer to conduct investment business or to buy/sell any investment.