2017 Market Overview

Presented by S.S. Gosali©March 2017

2017 Market Overview

• This research report is copyrighted and prepared for internal use only and may not be redistributed, retransmitted or disclosed, in whole or in part, or in any form or manner, without the express written consent of the author.

• The author does not accept any liability whatsoever for any direct, indirect or consequential damages or losses arising from any use of this report or its contents. Use it at your own risk and please consult a registered investment advisor before investing.

• The document is not intended to provide tax, legal, insurance or investment advice, and nothing in the document should be construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any security by the Author or any third party. You alone are solely responsible for determining whether any investment, security or strategy, or any other product or service, is appropriate or suitable for you based on your investment objectives and personal and financial situation. You should consult an attorney or tax professional regarding your specific legal or tax situation.

Disclaimer

• 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

• 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

• 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)

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.

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).

Results from Last Year Analysis

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.

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.

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.

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.

NVDA

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

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.