Is the Trump Rally Overbought?

Posted on 03/09/2017 10:20 AM

Disaster was predicted if Donald Trump was elected as president -- the markets were going to collapse. The world was sweating out how bad the damage would be with Donald Trump as the president; Mark Cuban said he would rather give up all his money than to have Donald Trump as president. It was as scary as watching Ben Bernanke and Hank Paulson sweat it out of the banking crisis.

Donald Trump was elected president and the markets initial reaction was a quick sell off followed by one of the biggest rallies in history. Once it was evident Trump was going to be elected the markets collapsed, sendingthe Dow Jones Industrial Average (Dow) to an 800-point decline and the S&P Down the limit. Tuesday night saw a lot of hand wringing the Dow futures making their lows at 1:00 am EST.

A funny thing happened on the way to a collapse, as if Houdini was performing an illusion the markets stopped going Down. By the actual opening of the stock markets the rally was on and they have been going straight up ever since. All the major indices are higher, Dow 6%, Russell 11%, S P 4% and the NASDAQ even with a couple of major beatings 4%. I must say this is quite the collapse.

The bigger question must be; Is this rally too big and on too much anticipation of the future? The answer is yes. Markets are forward looking and certainly the future looks brighter however the economy is still a shamble and the markets are getting more overpriced with every uptick in the markets. The economic problems didn't disappear unless Houdini came back, which means there are still many issues that must be dealt with.

While I believe Donald Trump is the best answer to our problems, unfortunately he can't do everything himself and he can't do it that fast. There is work to be done here and across the globe to clean up the mess that was made by the current administration and the central banks around the world. One of the biggest reasons for economic failure is debt and right now there is so much debt out there that a big percentage must be forgiven, liquidity must be restored along with growth.

If Donald Trump can get the right people and execute his plan to perfection the markets will still correct before they will be able to sustain a rally like we have seen the last five days. Add to the problems the power mongers like George Soros that are going to try and stand in the way. We have a long road to drain the swamp and I believe Trump will do just that, but this market is going to get hammered first.

Keep those stops tight!

The views, opinions and positions expressed by the author are theirs alone and do not necessarily reflect the views, opinions or positions of Pro Farmer.

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