Weekly Market Review & Target Fills December Week 2

The big new for the week was the resignation of Prime Minister Matteo Renzi of Italy, following the referendum on Sunday. The politically center to left Mr. Renzi had previously stated, that he would resign if the vote for a reform of the Constitution failed in a popular vote. It was rebuffed by 59.6% of the electorate.

The presidential election in Austria last Sunday saw a reaffirmation of victory for Alexander Van der Bellen. The former Green candidate had preached moderation and tolerance.

Time Magazine names United States President-elect Donald Trump as their Person of the Year.

The rally in the global equity markets continued this week, nearing a 16 month high. All four main indices in the United States were at or near new lifetime highs this week.

The United States Dollar (USD) is continuing to climb against the Euro now at $1.05. Financial analysts continue to expect parity between the two currencies shortly.

USD remains has experienced an over 8.0% rise against the major currencies of the world, in the last four months.

Legislators from the 3 opposition parties in South Korea, voted on Friday to impeach embattled President Park Geun-hye. The crisis is over a corruption scandal involving a confidante.

The ECB (European Central Bank) will begin to trim back on quantitative easing in April of next year. Monthly asset purchases will be reduced from 80 billion Euros to 60 billion Euros. However, the monetary program itself, will continue to the end of 2017.

The immediate surge in oil prices following the crude production cuts made at the OPEC (Organization of the Petroleum Exporting Countries) meeting, have somewhat tempered this week.

International Commodity News

The agreement made by OPEC last week, is the first time since 2008 that the oil cartel has been able as a group to make a deal to reduce output. Production will come in at around 32.5 million barrels a day.

OPEC agreed to a cut of some 1.2 million barrels a day, which would equate to a 4% to 4.5% cut in cartel production. Globally, this will amount to a reduction of between 1% and 2% of output.

Saudi Arabia took the primary role in cutting output the most, to help stabilize global oil prices.

The question remains how will the deal hold, and can OPEC get more non-OPEC countries to also reduce production. An upcoming meeting between a number of outside producers is scheduled for this weekend.

Azerbaijan, Kazakhstan, Russia and a number of other countries will be in attendance.

Crude oil prices climbed over 10% last week on the OPEC output agreement. Oil remains above $51 USD in the United States and above $54 USD in Asia and Europe.

Another ongoing event is the ongoing drop in precious metals, over the last couple of months. The underlining cause for this has been the rising valuation of the American dollar and the money now going back into equities.

Gold had been slowly dropping in price, since reaching a high of $1,370.80 USD in August.

Last week gold was being sold for $1,176.20 USD, this week the price fell further to $1,163.90 USD an additional decline of 1.12%.

Gold prices are still up +11% in 2016.

The price for silver has dropped from $19.43 USD from over 2 months ago, to $17.02 USD reported today. This indicates a decline of 14.16%. It listed for $16.77 USD last week. The price is up 1.49% as a result.

Silver is still up over 15% for the year.

United States

The United States Army Corp of Engineers under direction from President Obama, will not grant a final permit for a controversial 1,200 mile Midwest oil pipeline. The $3.8 billion USD project is complete, except for a remaining 1,100 feet that would be placed under a Missouri River reservoir in North Dakota. The incoming Trump Administration, is likely to approve completion of the project.

The American dollar is at 14 year high in valuation this week, against a basket of other currencies, as global bonds and emerging market currencies remain lower.

The 10 year Treasury yields remain near their highest rates this year at 2.44%.

U.S. bond yields are now near 14 year records, as investors calculate that inflation and interest rates are heading higher.

All 4 market exchanges in the United States (U.S.) rose this week. The Dow Jones Industrial Averages is now near 19,700 from 18,000 four weeks ago. The Dow, the Standard & Poor 500,the NASDAQ and the Russell 2000 composites all reached new life time high this week.

The highs on Friday were 19,702.22 for the Dow, 2,255.39 for the S&P 500, the NASDAQ was at 5,450.16 and the Russell 2000 Index for firms with smaller capitalization was at 1,392.71.

For the week, the Dow is up 2.31%, the S&P 500 is up 2.43%, the NASDAQ is up 2.90% and the Russell 2000 is up 5.43%.

Year to date, the major indexes have advanced the following. The Dow Jones Industrial Averages is up about 13%, the Standard & Poor 500 has increased near 12%, the tech heavy NASDAQ has advanced over 10%.

By the end of November the Russell 2000 was up 12% since the election of Donald Trump. The index broke the longest winning streak in 20 years, at the beginning of last week. The Russell 2000 was up 22% in 2016 and 21% in 52 weeks.

U.S. mortgages rates are at their highest levels in more than 2 years.

Africa

Libyan Forces backed by the United States retook the coastal city of Sirte from the Islamic State.

Europe

The ECB is ready to temporarily step up purchases of Italian government bonds, as a result of the constitutional referendum. 

Italian banks are now holding nearly one-third of the blocs unpaid loans, which is near 990 billion Euros ($1055.36 trillion USD). The Bank of Italy admits there is a total of 360 billion Euros ($385 billion USD) of bad loans in the banking sector.

There is a fear that borrowing costs will increase substantially, given the present state of Italian banks and political instability. There are reports that the country may receive financial assistance from the European Stability Mechanism, to help stabilize the banks.

Following the resignation of the Italian Prime Minister Matteo Renzi, the opposition anti-establishment Five Star Movement is calling for a plebiscite on Italy’s membership in the European Union.

The spreading populist movement in Europe suffered a setback in Austria. The presidential contest saw the defeat of Freedom Party nominee Norbert Hofer, against the leftist Alexander Van der Bellen.

The Chancellor of Germany Angela Merkel, was re-elected by the conservatives to represent them in the 2017 elections. The margin of victory was smaller than expected. It is the result of the now controversial migrant policy, she initiated two years ago.

Socialist President Francois Hollande of France has stepped aside for re-election next year, due to his present unpopularity. This paves the way for Prime Minister Manuel Valls to head the ticket.

EU leaders agree on a number of short term debt relief measures towards Greece. However, they are still somewhat split, over the overall 86 billion Euro bailout package.

In the United Kingdom, Parliament voted to initiate Article 50 by March 31, 2017. This will then begin the process, for the country to formally leave the European Union in a move known as the Brexit.

Ukraine continues to push for visa free travel throughout the European Union. The EU is working to overcome a number of obstacles, to keep the commitment that had been made to the Ukrainian government, in exchange for economic reforms.

Russia

President Putin continues to insist he is ready to cooperate with new incoming leadership in the United States.

Latin America

Brazil is still dealing with the worst recession in 80 years. President Michel Temer moved behind the scenes this week, to defuse rising tensions between the Supreme Court and the Senate. This will help ensure the passage of government spending cuts, that foreign investors want to see.

Middle East

Turkey is planning a referendum next spring, that will constitutionally expand the powers of the president. This is ahead of the Turkish presidential and legislative election of 2019.

The Iraqis led alliance in the fight to eject the Islamic State from Mosul, is becoming increasingly frayed. The battle for the 2^nd largest city in Iraq, has been ongoing for weeks.

Asia

The Reserve Bank of India will keep interest rates at 6.25%. This is despite the present cash shortage, that has been created by the withdrawal of the 500 and 1000 bank notes.

The financial disturbance created by the monetary reforms in India, threaten the world’s fastest growing major emerging market.

The economy in Japan grew slower in the 3^rd quarter, at an annualized 1.3%. Preliminary reports had indicated a faster pace of 2.2%.

The Japanese Parliament ratified the Trans-Pacific Partnership this week. The action is mostly symbolic, given the virulent opposition expressed by President-elect Trump in the United States.

Vietnam has begun dredging work on the disputed Ladd Reef in the South China Sea. Although at present, the island it is totally submerged during high tide, there exists a lighthouse and a small contingency of Vietnamese soldiers.

The Prime Minister of New Zealand in power since 2008, has announced he will not run for re-election in a bid for a 4^th term.

For the first time in more than 5 years, the Australian economy shrank last quarter. Officials in Australia attribute the results to a drop in business investment, housing construction, and public spending.

In related news,the central bank in Australia leaves interest rates unchanged, at a historic low of 1.5%.

China

Foreign exchange reserves in China, were down again in November for the 5^th consecutive month. The total dropped an additional $69.06 billion USD. The balance is now equal to $3.052 trillion USD. It is the lowest level since March of 2011.

In a move to encourage more foreign investment, China passed new guidelines to open their markets further to outsiders.

After 7 months of losses, exports in China finally turned around by 0.1% on year. The cheaper yuan helped with foreign purchasing of Chinese goods.

Energy News

American West Texas Intermediate (WTI) last Friday was listed for $51.33 USD, an increase of 9.80% from the previous week. This week oil is selling for $51.45 USD, a negligible difference.

International Brent last Friday went for $54.16 USD. It was an increase of 13.71% from the previous week. This week oil is being sold for $54.26 USD, a negligible difference.

U.S. weekly oil inventories were drawn down by 2.2 million barrels.

American priced and Brent crude oil are both up about +39% in 2016.

The Investment Newsletter had 1 target fill to report this week, and 0 early stock target fills.

Knight Transport ($KNX) Bought long on 11/14/16 for $30.82. Long Term Target Fill at $37.50 on 12/07/16, a 21.67% return for investors.