Donald Trump managed to close out his first year in the White House with a major tax reform package that had something for everyone, except for homeowners in deep-blue states, but most especially for investors. Among the highlights that have them so excited is a tax holiday allowing for repatriation of overseas cash. Investors are hoping that cash is used for more dividends and buybacks, but a safer bet could be on another round of merger mania.
Numerous studies have demonstrated that spin-offs outperform the overall market by a large margin. Spin-offs, as a group, tend to outperform the broader stock market. During the past 15 years, (through 2017) the Bloomberg U.S. Spin-Off Index returned 999.4%, while the S&P 500 Index returned 203.9%.
One way to prevent losses in a deteriorating position is the use of stop-loss orders. A stop-loss order is activated when a stock, ETF or futures contract reaches a certain price point. Let’s use the example of Facebook. On the afternoon of Jan. 4, 2018, a purchase of FB is made at $185. After rising above $188 a stop is placed to sell FB at $184 (just below the previous high close) on Jan. 11. This means that at $184 the stop becomes a market sell order and the long position is liquidated.
Some trending markets, such as gold, the euro and bitcoin may continue their behavior into next week. I’m bullish-sideways for next week on all symbols I track, except the yen, soybeans and bitcoin, due to understudies. The Yen, Beans, and Bitcoin chart bearish to me. The breakout candidates for this coming week are the Euro (monthly pivots are equal to last month, plus trending weekly pivots), gold (bullish), soybeans (bearish hammer) and bitcoin (bearish).