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No one knows precisely when the COVID-19 pandemic will end. Most experts are hopeful COVID-19 restrictions will end and life will begin returning to normal in the middle of 2021, coinciding with the widespread distribution of an effective vaccine.
Nobody knows what the recovery will look like once COVID-19 and its associated restrictions lift, but it will benefit you to pay attention to that shape. As more and more experts feel they can accurately predict the recovery’s shape, it will give us a better idea of the smartest investment strategy. Here are some economic recovery stages to keep an eye on:
A V-shaped recovery, where the economy recovers immediately and vigorously (likely already passed).
A U-shaped recovery, where the economy is stagnant for a while, then recovers fully.
A W-shaped recovery, where the economy experiences a false upswing, followed by a V-shaped or U-shaped trajectory.
A K-shaped recovery, where some sectors and individuals experience a V, while others continue an elongated downswing.
An L-shaped depression, with no clear sense of the economy recovering any time soon.
November is about to end and SPX is likely at the time of writing to do something not previously done in the last twenty five years, which is to close a long way above the monthly upper band, currently 3566 area, only three months above the last strong punch close above in August. What does this mean?
Well on NDX this would give about 40-45% odds that the market would then deliver a series of closes at or above the monthly upper band in coming months, but while that is possible on SPX, historically there would be little precedent for it. The odds still favor a close at or below the monthly upper band at the end of December, at which point it would be unlikely to be over 3600.
While the wider media want to focus your attention on the buying spree known as “Cyber Monday” today, traders may want to take a larger look at the impact of price action in the dollar index as November comes to a close.
Why you ask? Because it’s a technical D-Day for the almighty dollar.
Well, another holiday is approaching, which means one thing: Marissa Mayer is totally changing the decorations in her front yard and, most visibly, is repurposing the funeral home she owns (a block away from her house, closer to mine) as well. If you weren’t accustomed to it, you’d be as confused as my dogs were this morning.