Road map for the remaining 2016

I'm heading to Panama to enjoy some warm weather and therefore won't be able to watch the market as much as I'd like to. I just want to lay out my thoughts on how the market may behavior in the remaining weeks of 2016. I'll be fun to see if this could turn out to be a good road map I design for it.


The market has enjoyed a fantastic Trump rally since Nov 8, from being extremely depressed and oversold to extremely euphoric and overbought. Of course, it can simply continue to go to the moon but more than likely, I think it will need to take a breath at least in the very near term. A mini crash to bring down S&P towards the 2100 level is a real possibility in the next week or so. If that happens, then the market is poised in a position to enjoy the seasonal bullish year end rally. Of course it is yet to see if it has sufficient energy to challenge its all time high and break out by year end but ironically the market seems to be really happy with a Trump presidency now and wants to go up. We will know better when we are close to the year end. This projection is based on a scenario that there is no black swan to surprise but we may very much likely see something significant to come. No, it is not the FED rate hike which is already priced in I think. It is potentially a European bombshell bigger than the BREXIT that no one seems to care about at the moment. It is the coming Italian Referendum on Dec 4.



The Italian Referendum is a constitutional referendum. The Italian voters are to be asked whether they approve of amending the Italian Constitution to reform the appointment and powers of the Parliament of Italy as well as the partition of powers of State, Regions, and administrative entities. Simply put, this is virtually a confidence vote to the current government, challenged by the rising rival party which is becoming increasingly popular.  A defeat in the referendum for Italy means a no confidence of the ruling party that could lead to social turmoil in other countries that are already facing a strong resistance to changes with elections across Europe that will take place next year. If that's the result of the referendum, the opposition party will soon come into power, which may very well let Italy leave the Euro zone. This is at least what they are aggressively promoting. This could potentially be a shock wave triggering another worldwide panic selloff. Of course no one knows for sure what the market will do and react as we have clearly see the market has its own mind and may surprise everyone but at least this is a potential threat to the year end rally. Just keep this in mind. We are likely hearing more talking in the next 2 weeks, which by itself may increase the volatility. Don't be too complacent!