Need to Know: The powerful bullish signal that could set up 2017 for stock gains

From the looks of things on the first day of trading after Christmas, there may not be enough traders/desire/interest to get the Dow industrials to 20,000 by year end.

Though it has little to do with a long-term strategy, hitting that level wouldn’t be such a bad thing before we head into 2017. Simply, a box to check, let’s say.

Yet there may not be enough gumption no matter how close the target stands. “When the reality of no stimulus catches up with the perception of stimulus, plus the Fed tightening, that’s the train wreck. Either we’re going to have a recession or a stock market correction,” Jim Rickards, editor of financial newsletter Strategic Intelligence told CNBC in a post-Christmas interview.

Our call of the day is sticking to the positive side, however, with a technical signal that some say could set stocks up for more gains in 2017.

It’s referred to as a “bullish outside year,” which simply means that the highs and lows for this year have been both outside the range they stuck to in 2015. (See this mention by Reformed Broker’s Josh Brown over the summer).

Jonathan Krinsky, chief market technician at MKM Partners, discussed the move in a note to clients, and shows just what that looks like in this chart:

LPL Financial


“Assuming the S&P 500












SPX, +0.13%










 can close the year above 2135, it would be just the third ‘bullish outside year’ since 1928, says Krinsky.

And this is where he says it could look positive for the year ahead. “While a sample size of two is insufficient from which to draw many conclusions, the two prior bullish engulfing years (’35 and ‘82) were followed by yearly gains of ~28% and ~17%, respectively,” says Krinsky.

Here’s one more for the bulls:

Key market gauges

No surprise to see futures on the Dow












ESH7, +0.11%











YMH7, +0.05%










  and S&P 500












ESH7, +0.11%










 off to a slow start. The Dow












DJIA, +0.07%










 logged its seventh straight weekly gain in a quiet preholiday session on Friday, but moved less than 0.1%, leaving the 20,000 milestone about 20 points off. The S&P 500 finished up 0.1%.

Read: The S&P 500 is expected to rise only 4% by the end of 2017

Asian stocks












ADOW, +0.05%










finished mostly flat, and European stocks












SXXP, +0.14%










look to be headed that way.

Gold












GCG7, +0.80%










 and silver












SIH7, +1.31%










 are notable as they’re up a fair bit this morning.

The buzz

Endologix












ELGX, +1.63%










 is off 16% in premarket on a probe into a medical-device manufacturing issue.

And Seattle Genetics












SGEN, +1.98%










 is down 13% after the FDA put holds on several of its early-stage clinical trials.

Apple












AAPL, +0.20%










 may roll out a new 5-inch iPhone with a vertical dual-camera system for 2017, says MacRumors.

Alongside a potential Twitter buyout












TWTR, +0.55%










 , these other media deals should happen in 2017, says Digiday.

Iran says it sealed a deal with Boeing












BA, +0.22%










 to pay about half the price for 80 new airliners.

Toshiba












6502, -11.62%










 took a 12% hit in Tokyo after confirming a media report that it will book an $854 million impairment loss related to its U.S. subsidiary Westinghouse.

The chart

In case you missed the annual “Holiday tree of returns” from LPL Research’s Ryan Detrick, here it is:

LPL Research


Detrick says it’s a “nice yearly reminder that returns tend to look like a normal distribution curve,” but that it’s also eye-opening because it shows strong equity returns during bonafide recession years.

“Of course, most of the largest yearly equity losses do take place during a recession, but a recession by itself isn’t a sure thing for lower equity prices. These are important reminders each year,” he says.

Here’s another worthwhile chart:

The economy

There’s just a bit of data in a holiday-shortened week. Case-Shiller home prices at 9 a.m. Eastern time Tuesday, followed by consumer confidence at 10 a.m. Eastern.

The stat
Reuters


Farewell to another musical great in 2016

Over 100 million — that’s how many records pop star George Michael, who died over the Christmas holiday at the age of 53, sold worldwide.

The quote

That was part of a post-Christmas tweetstorm by President-elect Donald Trump, who tapped on his charitable giving and swatted away President Barack Obama’s claim (in this CNN interview) that he would have beat the billionaire in the November election.

Among the replies to the above tweet, was a tweet-by-tweet retelling of “How the Grinch Stole Christmas.”

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This woman totally nailed the perfect gift for her boyfriend:

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