Market Analysis

Straight Talk #11

Last week we discussed the importance of the $NDX chart and after another rally to the previous highs $NDX reversed hard for a potential double top and broke its trend off of the March 23 lows. A technical move with potential significant implications upcoming earnings reports from $AAPL and $AMZN offering further rally potential notwithstanding.

But several observations are notable:

A week that was dominated by positive headlines at the beginning of the week, namely an EU stimulus package and a barrage of hopeful Covid vaccine headlines the initiative positive price action induced by these headlines ended up being sold leaving later buyers potential trapped:

Increasingly reality is challenging the narratives of hope, optimism and even momentum. Jobless claims keep coming in higher than expected, permanent layoffs are mounting as are permanent business closures. “The unemployment situation is really, really bad” as the prospect of persistent higher unemployment puts a dampener on the V shaped recovery narrative.

This as virus deaths in the US have been rising by over a thousand a day again for several days in a row and PPP benefits are about expire putting a heavy focus on whatever stimulus package Congress can agree to in the next week or two. Time is running out,, the clock is ticking and the US election is coming ever closer.

And there are threats mounting against big cap tech as the monopoly power of some of these companies is coming under ever closer regulatory scrutiny. Case in point was a WSJ article highlighting how Amazon met with startups under the guise of  investing in these companies only to copy their ideas and then launch competing products.

Hence it is notable that the $SPX’s foray into new highs above the June highs was not only reversed but again stopped precisely at the very same trend line that was resistance in June:

This as earnings reports of big tech heavy weights such as $MSFT and $TSLA failed to inspire new buying but rather saw selling which spilled into the entire tech sector culminating in its breaking the up trend off of the March lows:

A rally driven by optimism, hope and liquidity suddenly finds itself reversing even with more hope, optimism and liquidity right at the point of another foray toward record valuations inside a recession:

Perhaps valuations mean something after all.

For a more in depth discussion of the issues please join us in this week’s edition of Straight Talk including what to watch for going forward:

Note: I’ll also be posting a separate Market Video focusing on the latest technical implications this weekend (For those not already signed up for these videos please see link to sign up).

For the latest public analysis please visit NorthmanTrader. To subscribe to our market products please visit Services.

All content is provided as information only and should not be taken as investment or trading advice. Any investments, trades, and/or speculations made in light of the ideas, opinions, and/or forecasts, expressed or implied herein, are committed at your own risk, financial or otherwise. For further details please refer to the disclaimer.

18 replies »

  1. Part of the continuing bull narrative rests on this notion that we can cope with COVID and get back to “normal” in our daily lives. As you point out Dan, this is NOT the experience in NYC – I know of several friends who have been residents of the city (as was I for many, many years) who are putting their apartments on the market and leaving. Interestingly, their rationale for leaving while influenced by COVID is more about TAXES. Ans just as the Fed is boxed in and cannot escape the vicious cycle they’ve created with interest rate policy and monetary expansion, cities like New York and states like Illinois face increasing fiscal strain that they try to assuage with the very tonic that drives away residents, TAX INCREASES, While the normalcy of life in these places is upside down reacting to COVID, it is not going to get better if residents who support these locales move to states and cities with less onerous taxes.

    On another note, I live in a resort area, Cape Cod. Here, tourist season is “business as usual” and the Governor of MA, Charlie Baker is worried enough to try and intervene in the movement of folks by instituting a set of restrictions and accountability for people coming into and out of Massachusetts. Policy included quarantining for 14 days if you come into the state from higher risk of COVID states or proof of a negative COVID test. Fines of $500/day if people do not comply. Not sure how this can be enforced, but it is emblematic of the deeper chill on life lived normally, pre-COVID and cannot be seen as anything other than a reaction to increasing COVID infections. We are far from seeing anything resembling normal on the horizon, in my opinion. Markets will scream for more Fed and will likely get more. But at some point, the uncertainties INCREASING tip the sentiment hand and money will flee like residents of NYC!

  2. With so many negatives and risks mentioned in this summary you may have just timed the end of this three day correction.

    • 3-day correction….. buy, buy, buy – lol….you never have anything to say other than Sven might be wrong. What do you have to say about the markets? Let me guess — nothing!

  3. I been investing in gold every year since 2016 …the dollar is deteriorating and bought Bitcoin just in case ….paper assets in US dollars is wrecking havoc it’s inevitable everyone is on the titanic

  4. Federal Reserve Jaw boning coming !! The easy money 💴 has been made ! Look for gaps on earnings on Apple and Amazon and GooG …FB …then sell,the PIg 🐖 utilize the Nasdaq 100 merci beaucoup ! Sven

  5. you both may be old enough to remember the Swine Flu vaccine that was rushed out in fall 1976.

    It was halted after Guillain-Barre syndrome was 4-times higher in patients receiving the vaccination, and Swine Flu was 7-times higher in those who were vaccinated vs those who were not.

    Without indemnification from lawsuits from Congress, pushed by the Ford administration, the vaccine likely would not have been used.

    This is why vaccines usually take 4-years to reach the market.

    If it was so easy to vaccinate for Coronaviruses, we’d have one for the common cold already.

  6. It’s all ending folks. The birth to growth to stability period of our societies is over. We are now cascading down the decline to destruction phase. It will not begin to improve until until we start a new birth/rebuilding period again.

  7. Sven,

    The next time you are on CNBC, and if they start asking you about election market volatility and possible fraud, simply ask “America” why we do not simply vote at the most secure electronic devices in the world, specifically bank ATMs. Not only does my bank ATM require a special card, a four digit code, and take a video of my face when I use each device, it instantly tracks and uploads all the data to the world’s most secure cyber network. How hard would it be to ask me not only if I want my normal $700 cash withdrawl, but ask me who I want to vote for come November 3, 2020. Corona-secure, fraud-secure, identity-secure…why do we lack the creativity to not use the trillion dollar network the banks have already set up for electronic voting, one in which God himself trusts with our money. Hell the government could pay the banks for each vote and make them even richer. Ask CNBC audience that question, as i would love to see the blank stare on their they explain why we use 70 year old maual voting machines instead of current Naz technology. I suspect the real reason we do not have secure voting is if all the people could easily vote, then corporate america would suffer, along with our politicians as change would occur that allows the people to thrive, not just somewhat survive. Thus they will tell us electronic voting is both impossible and fraudulent forever…”sad”.

  8. Mr Market: Ho, Jay my man.
    Jerome Powell: Hi M, I’m kinda busy right now, FOMC meeting.
    M: I know, that’s what I was calling about.
    J: OK, be brief.
    M: It’s now Jay, the time is now.
    J: What? Oh, the Ruby thing.
    M: Yes Jay, you gotta cross it.
    J: Can’t it wait till September?
    M: No Jay, it can’t wait.
    J: Why? a few weeks won’t matter.
    M: Some ugly earnings coming this week, could be a big puke, will hurt you more if you wait…
    …and you know the golem’s getting very twitchy lately.
    J: I’ll do what I can, M, but there’ll be serious opposition at the meet, I can’t guarantee it.
    M: You’ll do, Jay, think of all that money you’ll lose if you don’t.
    J: I’ll do my best, M.
    M: I’ll be watching, Jay, always watching. Be seeing you.

    • M: Jay, oh Jay.
      J: What’s up M?
      M: You blew it Jay, you just blew it.
      J: Why so?
      M: You HAD to say you are going to ask Congress to let you buy stawks.
      J: That can wait. Stocks are up today, so things are fine.
      M: Tomorrow and tomorrow and tomorrow.
      J: Don’t try to threaten me, M.
      M: Be seeing you Jay. Maybe.

  9. Sven Henrich@NorthmanTrader·5m
    Wild guess: The Nasdaq may be up tomorrow.


    The Top is in.

  10. “Stocks are bad”.
    Buying opportunity of a lifetime to bet against the stock market.


This site uses Akismet to reduce spam. Learn how your comment data is processed.