“The two most powerful warriors are patience and time.” – Leo Tolstoy

1. Trump Signed Executive Order to Renegotiate NAFTA and Intent to Leave TPP — President Donald Trump signed an executive order formally withdrawing the United States from the 12-nation Trans-Pacific Partnership trade deal. In an Oval Office ceremony, Trump also signed an order imposing a federal hiring freeze and a directive banning U.S. non-governmental organizations receive federal funding from providing abortions abroad. Trump is also looking to begin NAFTA negotiations with Canadian Prime Minister Justin Trudeau.
2. Dow Crosses 20,000 — the Dow took almost 103 years to reach 10,000 in March 1999, and another 17 years to double to reach 20,000. However, the last 1,000 points to reach the 20,000 milestone took just 42 trading days. The blue-chip index has been propelled by President Trump’s moves to promote infrastructure projects and cut regulation, while recording the all-time high during his first week in office. As a whole, the U.S. stock market has gained $2T in wealth since Election Day.
3. Mexico’s President Cancel Meeting With Trump — Mexican President Enrique Pena Nieto canceled his meeting with Trump after he formally announced plans to build a border wall. The U.S. President also slashed funding to so-called sanctuary cities in the start of a strategy to tighten immigration controls. Construction of the wall will begin within “months,” according to Trump, stating Mexico would reimburse the U.S. for the cost “100%.”. President Trump also impose a temporary ban as early as today on virtually all refugee admissions to the U.S. from “countries that have tremendous terror.” “Our country has enough problems without allowing people to come in who, in many cases or in some cases, are looking to do tremendous destruction,”.
4. 4Q GDP U.S. Growth Cools on Trade Drag as Business Spending Rises — Gross domestic product, the value of all goods and services produced, rose at a 1.9 percent annualized rate following the prior quarter’s 3.5 percent gain that was the largest increase in two years, Commerce Department reported. The results cap growth of 1.9 percent for the full year and reinforce the leading role of household purchases while showing that businesses are starting to spend again. The strong job market and optimism among consumers and companies for President Donald Trump’s policies are likely to keep growth humming along in 2017, though tensions over trade could temper any gains.
5. AAII Bullish Sentiment — last week’s AAII bullish sentiment figures, which showed that bullish sentiment fell by roughly five points (37.01% to 31.58%) for the second five-point decline in the last two weeks. That has not happened since May 2016 right before the S&P 500 (SPX/2294.69) fell 6.0%. Jeffrey Hirsch, editor at Stock Trader’s Almanac noted:
“Since 1950, January S&P 500 gains of 2% or more corrected or consolidated in February 62.1% of the time. In the 20 years that the S&P 500 gained 4% or more in January, 65.0% of the time the S&P declined or finished flat (less than 1% gain) in February.”

The week ahead — Economic data from Econoday.com:

“We want to perceive ourselves as winners, but successful traders are always focusing on their losses” – Peter Borish”

1. Trump Administration: Priebus, Bannon Given Key Roles — U.S. President-elect Donald Trump has made the first official appointments to his White House administration after a shake-up that saw VP-elect Mike Pence replace Chris Christie as the head of his transition team. RNC Chairman Reince Priebus has been selected as Chief of Staff, while Trump’s campaign Chairman and former head of news outlet Breitbart, Steve Bannon, will lead as Chief Strategist and Senior Counsel.
2. US Retail Sales Rose 0.8% in Oct vs. 0.6% Increase Expected — the Commerce Department reported retail sales increased 0.8 percent last month, also boosted by demand for building materials likely as households cleaned up and made repairs in the wake of Hurricane Matthew. The latest figure shows households bought motor vehicles and a range of other goods. September retail sales were revised up to show a 1.0 percent increase instead of the previously reported 0.6 percent rise. The combined September and October sales gain was the largest two-month rise since early 2014.
3. Buffett Buys Airlines In Latest 3Q Holdings — After famously shunning the airline industry, his holding company Berkshire Hathaway (BRK.A, BRK.B) invested $1.2B in American Airlines (NASDAQ:AAL), Delta (NYSE:DAL), United Continental (NYSE:UAL) and Southwest (NYSE:LUV). The Sage of Omaha did not share his rationale behind the trades, but he has long been bearish on the sector.
4. SEC approves Consolidated Audit Trail — despite years of delays, the SEC has finally approved a plan to introduce a vast surveillance system to oversee trading on the $23T U.S. stock market, in response to the 2010 “Flash Crash.” The creation of a Consolidated Audit Trail will establish a regulatory central database and monitor every trade order, execution, modification and cancellation in real-time.
5. AAII’s Weekly Bullish Sentiment — After a record 54 weeks where the AAII’s weekly bullish sentiment reading was below 40%, the Sentiment surged above 40% for the first time since October 2015 after Trump was elected.

The bearish sentiment also declined this week, falling from 29.3% down to 26.6%.

The week ahead — Economic data from Econoday.com:

“If all you have is a hammer, everything looks like a nail.” Bernard Baruch

1. No Oil Output Deal for Non-OPEC Producers — Non-OPEC producers made no specific commitment on to join OPEC in limiting oil output levels to prop up prices – a stance that suggests they want the group to first solve its differences. A day earlier, OPEC members themselves were unable to agree on how to implement a deal to limit production amid objections by Iran which has been reluctant to even freeze its output. Discussions will continue late next month, just days ahead of the upcoming OPEC meeting on Nov. 30.
2. 2016 Presidential Election — over 23M votes have already been cast in the 2016 Presidential Election nationwide, with 11.5M submitted in 12 key battleground states. Democratic-affiliated voters have so far outpaced Republican voters in Colorado, Iowa, Michigan, North Carolina, Nevada, Ohio, Virginia and Wisconsin, but in Arizona, Florida, Georgia and Pennsylvania, Republican-affiliated voters have overtaken Democrats.
3. Valeant ex-CEO and ex-CFO Focus Of Criminal Probe — Bloomberg news reported that ex-CEO Michael Pearson and ex-CFO Howard Schiller are the focus of a DOJ fraud investigation. According to Bloomberg, the nature of the charges are related to the company’s hidden ties to now-defunct Philidor, a specialty pharmacy that used dubious tactics to increase insurance reimbursements for Valeant (NYSE:VRX) products.
4. Volvo S90 Production Moves to China — Volvo Cars is moving S90 production from Sweden to China, as well as commencing production for future 40 and 60 series models in the East Asian country. Bringing manufacturing under the same roof is the latest effort to tighten ties between Volvo and its Chinese owner by transferring European know-how to Geely (OTCPK:GELYY) while maintaining the Swedish automaker’s business and reputation.
5. DOJ Charges for Generic Drug-Makers Colluded on Drug Pricing — according to Bloomberg, the Department of Justice may file charges in its generic-drug investigation by the end of the year. A number of companies including Mylan and Teva Pharmaceuticals have disclosed subpoenas and are cooperating with authorities. Shares of Mylan(MYL), Teva (TEVA) and Endo (ENDO) and Allergan (AGN) plunged after the news.
6. AAII Sentiment Record No. of Weeks Below 40% (1987-2016) — according to BIG, a record number of 53 consecutive weeks of bullish sentiments that stay below 40%. Also, the S&P 500 logged its first nine-day losing streak in almost 36 years. However, the 6- and 12-month returns following eight or more consecutive days of declines are usually positive and impressive. See charts below.

The week ahead — Economic data from Econoday.com:

“Change is the law of life. And those who look only to the past or present are certain to miss the future.” – John F. Kennedy

1. Prime Minister Shinzo Abe’s Liberal Democratic Party’s Landslide Victory — Prime Minister Shinzo Abe’s Liberal Democratic Party and its Komeito allies won a stronger majority in Japan’s Upper House election, in a development that will make it far easier to push through his economic agenda. “It is likely that a large-scale economic stimulus program, in the magnitude of at least ¥10T (2% of GDP), will be implemented,” Societe Generale said in a research note.
2. BoE Weighs Curbs On Property Funds — the Bank of England is weighing a raft of emergency measures to stem the flood of money out of Britain’s biggest property funds that caused fresh market panic last week, the Sunday Telegraph reports. These could include “enforced notice periods before redemptions, slashing the price for investors who rush to the door, or additional liquidity requirements for funds.”
3. Hague Tribunal Rejects Beijing’s Claims in South China Sea — backing a case brought by the Philippines, an international tribunal has ruled against Chinese claims to rights in the South China Sea, citing a lack of evidence that the country “historically exercised exclusive control over the waters or their resources.”. Although no U.N. peacekeeping forces are expected in the region, it can tarnish Beijing’s image as it will be looked at as a unilateral actor if it goes against the international community. Beijing has reiterated it will ignore an unfavorable court ruling on its South China Sea maritime claims, warning neighbors it would “take all necessary measures” to protect interests there.
4. Germany Sells First Negative Yield 10-year Bunds — Germany has sold 10-year Bunds with a zero percent coupon, issuing benchmark debt with a negative yield for the first time in history. The €4.038B sale came with a yield of -0.05%, meaning that investors who hold the paper until maturity in August 2026 will receive back less money than they paid.
5. Theresa May Elected as New UK Prime Minister, Assembles Her New Cabinet — Theresa May appointed Chancellor of the Exchequer Philip Hammond said the country will move swiftly to set broad goals for its new relationship with the EU. Former London Mayor Boris Johnson has been appointed as foreign secretary, fellow Brexiteer David Davis will be May’s Brexit “Tsar,” while former Defense Secretary Liam Fox has been handed the job of establishing new trade links.
6. AAII Bullish Sentiment Increased As Index Makes New High — AAII bullish sentiment increased this week from 31.1% up to 36.9%. It’s the highest weekly reading since early March. At 36.9%, bullish sentiment is still below its bull market average of 39.95%, and has been below 40% for 37 straight weeks! Also, S&P 500 has made a new all-time high and historical average return over the next 12 months courtesy of BIG.

The week ahead — Economic data from Econoday.com:

“Buy when others are despondently selling and sell when others are greedily buying” — Mark Mobius

1. China Trade Data Shows Further Weakness in — China’s trade slump has extended into September. Dollar-denominated imports plunged 20.4% Y/Y last month, while exports slipped 3.7%, translating into a trade surplus of $60.34B.
2. US Retail Sales Rose 0.1% in Sept Smaller than Expected — Retail sales excluding automobiles, gasoline, building materials and food services slipped 0.1 percent after a downwardly revised 0.2 percent gain in August. Cheaper gasoline weighed on service station receipts, but gains in purchases of automobiles and other goods pointed to solid domestic demand that could shield the economy from slowing global growth.
3. IPO Market Remains Under Pressure — following in the footsteps of Neiman Marcus (NMG), Albertsons (NYSE:ABS) has delayed its IPO due to Wal-Mart’s (NYSE:WMT) lower guidance weighed heavily on the U.S. market and pummeled retailers’ shares. Separately, payments processor First Data (NYSE:FDC) priced its initial public offering at $16/share, below its previously indicated range of $18-$20/share.
4. Square (SQ) (Mobile Card-Reader/Payment Service Provider) Files for IPO — Square has filed a public S-1. The mobile card-reader/payment service provider is listing on the NYSE under the symbol (SQ). Square generated $23.8B in gross payment volume in 2014 via 446M payments, and had over 2M sellers accepting five or more payments in the 12 months ending in June. 1H15 payment volume totaled $15.9B (+53%).
5. Fitch Downgrades Brazil to One Notch Above Junk — Fitch has cut Brazil’s credit rating to the brink of junk, warning the country could soon lose its coveted investment grade due to the “rising government debt burden, increased challenges to fiscal consolidation and a worsening economic growth backdrop.” The rating agency left a negative outlook on the new rating, suggesting it eventually could follow Standard & Poor’s recent downgrade to junk. Brazil’s economy is the 7th largest in the world at $2.4Tn – that’s above Italy, India, Russia, Canada, Australia and just under France ($2.8Tn) and the UK ($2.9Tn). S&P cuts Brazil credit rating dropped to BBB- by last month as well.
6. AAII Bullish Sentiment Dropped — According to the weekly sentiment survey from the American Association of Individual Investors (AAII), bullish sentiment dropped from 37.5% last week to 34.1%. This week also marks the 33rd straight week that bullish sentiment has been below 40%, which is also the longest streak on record. Oh well, maybe next week. Chart below via courtesy of BIG.

The week ahead — Economic data from Econoday.com: