As we head into 2017 we look forward to continued volatility in the markets with an eye on China and foreign currency markets as they are sure to provide us with many trading opportunites. Potential changes in regulation and a new President provide us fundamental changes in the markets, however, these should still be backed by technical insights before. I want to take a look back at a few key events for 2016 before a short oulook on 2017, starting with January or 2016.
Oil Markets Rise
The start of 2016 last year saw a gap-down across stocks and the markets entirely. With large selling to start the year many were caught off-guard and the selling did not really stop until the end of the month. Energy markets were also hit hard but proved to do well with large credit bets made by hedge funds and a subsequent rise in energy names through the middle of the year. We discussed in this post in February of our opinion of oil being at at short-term-bottom, which in fact, did provide with a few great swing trades in many oil related names such as ETE, XOM, CVX and APA to name a few.
Then we saw BREXIT which cause a normally slow Summer to turn into a historically volatile event for the markets. While students did extremely well (The $120,000 in 20 trading days from one here) and then a few others raking up near $40,000 + profits during the event it was a situation traders all dream of. The main trades here came in Index ETF's and volatility trades as the markets reversed on a dime to new highs, amazing!
We then moved to an entertaining Presidential election which provided the futures traders with an enromous opportunity to profit. Again, many of our students were able to seize this event to profit near the 5 figure marks that evening. With the new President, Donald Trump, shipping, coal and other stocks dormant for years rose from the lows on an amazing market rally.
If there was one theme for 2016 it was volatility. While we did not have a lot of consistent 'moving months' and saw more 'sideways action' the events that we did have provided us with great opportunities to short-sell and then also buy assests at very attractive levels. The volatility in markets is something we discuss heavily in our Trading 101 classes and something I have always looked for as a futures and directional options trader simply because of the great opportunities in risk that it tends to provide. As we head into 2017 I expect volatility to be more prevalent than that of last year.
A 2017 Outlook: A Few Ideas
With a new President and many potential changes to regulation (across multiple sectors) I believe that we should return to the 'stock-pickers' market. At the current levels of the markets it is my opinion that many names are 'too extended' and have priced in Trump policy a bit early and while I do believe financial stocks will benefit from potential changes in Dodd-Frank, the levels we trade at currently seem ripe for short selling. Then we have the possibility of continued rate hikes. How will this affect multiples? What can we expect for economic growth? It's too early, in my opinion, to make educated opinions on those items, however, I can say that personally, I will have a focus on real-estate names looking for potential short sells. While a new President, potential rate increases and regulatory changes are the driver for markets for 2017 the concept of supply and demand in markets still plays a role. It's just that now, we may see larger, extended moves that are backed by fundamental changes but discovered through technical insights prior. While at the time of writing this I do not see many names at demand levels I see plenty near or at supply levels which should make for a profitable short-selling opportunity into the start of the year.
Commodities & Futures
Then we have futures & commodities markets. While I personally have never been a long-term forecaster of gold or other markets I have been one to trade short-term moves in these markets. Regardless of President, Congress or regulation these markets tend to stay volatile and always provide short-term trading opportunities, so for income traders, this should remain the same. For me there is likely more of a focus on currencies this year, mainly, Yen, Euro and US Dollar as I am curious to see what affect the new US Congress and President may have on a Macro level.