MEAN REVERSION – FINALLY!
It looks like investors finally got it through there heads that many assets were stretched too far, and that some unwinding of the election trade was due.
Here is what I see for the first half of 2017:
S&P 500 Index (INDEXSP:.INX): Short term bearish, potential pullback toward 2,200 – 2,230 area, then new highs in 2,400 – 2,500+ region. I have shared this 2017 market outlook / price target several times.
Some areas of stock market seeing the most pain currently (and over the near-term): Russell 2000 (NYSEARCA:IWM), Financials sector (NYSEARCA:XLF), and Industrials sector (NYSEARCA:XLI).
Areas doing well in the near term: Consumer Staples sector (NYSEARCA:XLP), Utilities sector (NYSEARCA:XLU).
However, once this mean reversion ends, it’s very possible that financials and industrials will take us higher.
Emerging markets: EEM, EWZ, ILF – likely to see some leadership early 2017. Another mean reversion trade.
US Treasuries: I think treasuries have bottomed and could see a nice counter trend rally. I am long TMF (a leveraged short treasuries ETF). Once this counter trend rally ends, Treasuries could be a great short again.
Precious Metals: Looks like this sector has also reached a tradable bottom. I was stopped out of a gold position a couple weeks ago and now I’m looking for a decent entry. Frustrating!
Crude oil: This could be very bearish here if the minor breakout does not hold.
Thanks for reading. Reach out to me at arbetermark@gmail.com for inquiries about my newsletter “On The Mark”, if interested.
Twitter: @MarkArbeter
Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.
