I had the pleasure of speaking with Raoul Pal of RealVision a few weeks ago. The interview was recorded in mid July and it was an opportunity have a heart to heart discussion about the key big issues all of us face on some level or another.
We all find ourselves in a rapidly changing world with unprecedented circumstances and we are all trying to make sense of it knowing what we know, recognizing what we don’t know and keeping taps on the possibilities of what could happen.
RealVision just made the interview publicly available on their YouTube channel today and it turns out to be good timing.
From a market direction perspective one of the many issues we discussed was the open gap on $SPX, the February gap in the 3300 zone. 3 weeks later and here we are, $SPX filled that gap today:
I should note that the gap on $ES futures is still slightly higher, but hitting this gap today brings the S&P 500 within an earshot of all time highs, negative earnings growth be damned.
One can’t shake the feeling:
The S&P 500 is one stimulus package away from all time highs.
— Sven Henrich (@NorthmanTrader) August 5, 2020
The overpowering force of central bank liquidity continues to dominate the action today. And whether hitting this gap will prove to have any relevance remains to be seen. There are still open gaps higher on other indices, such as the $NYSE which still remains below the June highs:
But also note the multitude of glaring open gaps on $NYSE below. Not all gaps fill or will fill for a long time, but the abundance of open gaps is one of the many technical issues that give pause about the eventual sustainability of this historic liquidity driven rally.
These markets remain a journey, an expensive journey as valuations and forward’s multiples continue to expand.
Are these valuations and multiple expansions justified? I invite you to have a listen to our discussion as Raoul and I try to dissect the big picture issues:
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