We start 2017 with the continuation of the “Trump rally”. Last night President Trump delivered his first speech to Congress. The speech is being applauded on both sides of the aisle with the DJIA responding favorably by moving up over 200 points. The DJIA is now over 21,000, and the S&P 500 is closing in on 2400, close to my long term price target. We have seen the market make 13 new highs in February alone, including 12 new highs in a row. For now, stocks continue their euphoric rise and in many cases appear to be getting ahead of themselves. There is no question that stocks will outperform in the decades ahead, but I am still concerned about the next 12-18 months.
My market data and analytics are showing signs of exhaustion, with several of my indicators flashing sell signals. If you recall last year, when sentiment was negative, my data was suggesting otherwise, which was why I continued buying good stocks. That proved to be accurate and again I believe it to be accurate now. I started this year with some market forecasts, namely healthcare outperforming, gold outperforming and a correction at some point in 2017. For 2017, the healthcare sector is up close to 10%, gold is up close to 8% and the S&P 500 is up close to 7%.
I have recently added some energy sector exposure. I believe we are seeing a high probability set up for a move higher in this sector. Fundamentally, after seeing earnings crash last year, many energy companies are seeing large upward revisions to their earnings forecasts. Technically, there are several stocks in the energy sector that look very attractive. I see global tensions continuing to increase in several of the world’s leading oil producing regions.