First of all, please note for all paying members (including Bronze and Silver) there is a double-header companion piece called Crucial Details which you should watch. It has two important videos for you.
This is a vitally important juncture for the market. Emotions are running very high, and it sounds like a lot of folks are considering stocks to be “on sale”. My point of view couldn’t be plainer: I believe the Fake Bull Market that started March 2009 died on February 20, 2020. We will not exceed those highs for many years to come (unless some form of hyperinflation takes hold, at which point the nominal figures become meaningless).
Allow me to offer my quick take on the present Bull versus Bear arguments.
Reasons for the Market to Rally
- Intervention, Intervention, Intervention: the government will do anything and everything it can. Why? Because it’s made of humans, and humans are self-serving creatures. They are just trying to save their individual asses, and they will take any short-sighted measures needed to prop things up. They will fail in the end, but they don’t care.
- The Fed, The Fed, The Fed: Wednesday is probably going to be the most important Fed press conference in over a decade. Powell is under staggering pressure. He may come out with a $20 trillion program as far as we know. So far, everything he’s tried has flopped.
- Extraordinarily oversold individual equities: As I go through charts, about 80% of what I see has been blown completely to hell. If any kind of rally takes hold, we could easily see even the largest stocks go up 20% in a single day.
- Quick Selloff=Quick Recovery: The collapse has been extremely swift, particularly from the 2900 level of the S&P on down. There isn’t much in the way of meaningful overhead supply clustered at any specific price in that range.
Now, the other side of the coin………..
Reasons for the Fall to Continue
- Viral Wild Card: This is the giant unknown, and I’ve written about this before. Nowhere is it written than 100 million people won’t die. And irrespective of that, the shock waves through the global economy are going to continue on for many months, even if this entire crisis ended tomorrow. Day by day, everything is seizing up.
- Intervention Baked-In: Remember all the intervention I mentioned above? People already EXPECT it. So it’s not like the Feds have never done anything, and they’re going to suddenly step in and save the day. That’s old news. The market is already expecting unlimited aid, particularly from that vermin Steve Mnuchin.
- Perfect Touch-Point Reached: As a chartist – – and I was VERY clear with my premium members about this – – the key bounce target was 2730 on the S&P 500. We almost nailed it perfectly during that ridiculous rally on Friday.
Now this is the key: for lack of a better term, I call it Zone 1 and Zone 2. Zone 1 is the target I mentioned above…………about 2730 or so. Zone 2 is at about 2900 on the S&P 500 cash index. I’ve tinted the range between these zones below.
My view is that we have either completed the bounce already (which seems just a little too easy……….) or that, in the face of tremendous efforts by the government, including the Fed on Wednesday, we’ll fight our way back to 2900 or so. Every single stock market index has a Zone 1 and Zone 2, although obviously the numeric figures differ. But, broadly speaking, the form and nature of these recovery levels is identical from index to index.
Thus, the big unknown is whether all the “help” that D.C. provides will ignite enough excitement to get us back to about 2900. Having looked at all the charts, I am leaning slightly toward the prospect of a rally to “Zone 2”, but as I sit here at this particular moment on Saturday night, it sure looks grim on the weekend spread betting sites.
I hope we don’t come into Monday with another limit-down, because I am far too lightly positioned for that. Mercifully, I kept every single put option, but shortly after the close on Friday, I really began to worry that the “pop” that I had written my premium subscribers about had already transpired, and I didn’t have any chance at all to sell into it.
As insane as the past three weeks have been, I’ve got a feeling the week ahead is going to be in a class of its own.