The upcoming week in the markets and in the economy, as the month and quarter are coming to an end next week.
The broad market peaked on June 8 following the unprecedented intervention of the central bank, but has not been able to reach new highs since then, except for the Nasdaq. Any subsequent Fed efforts to prevent any market sales through an announcement of the purchase of individual corporate bonds 2 weeks ago or an announcement this week of easing Walker rules for banks yielded nothing but short-term market rebounds leading to lower highs and further growth. sale in stocks.
The basics and reality make themselves felt. Sharp bursts of coronavirus infections in some parts of the USA hinder the resumption of the US economy, which leads to a delay in reopening, and in some cases raises questions about the validity of V-shape recovery. in the economy, as fired ads continue to grow worldwide.
The realization that jobs will not return to February levels may take some time to sink as well as perhaps the inconvenient truth that the Fed’s intervention efforts could reach a point of diminishing returns.
In this week’s Straight Talk episode, we discuss the technical line of the market’s struggle for control, the state of banks and their communication to the markets, Threatening threats of technology of large investments, especially on Facebook, when advertisers massively get out of the influence of political reaction, further political risk that technologies with high capitalization will achieve quasi-monopoly status in the relevant areas, the constant threat of a virus rebirth in the story of the restoration of the V-shape, political risks for markets in the upcoming presidential election and the possible consequences of tax policy and much more:
For reference, a couple of diagrams related to what we discussed in the video above:
$ SPX, after peaking on June 8, when it marked a key trend line, has now turned down and closed the week below its weekly 5-EMA for the first time since March lows after breaking the rally trend earlier this month:
This may signal a trend change. But also note that $ SPX closed right at its weekly 50MA and just below the daily 200MA:
Also note the sequential breakouts of volatility after the peak of June 8th.
Put in a terrible stock in the banking sector, even weakening Walker’s rule this week will lead to a rebound being sold. Worse for banks, the potential is that the chart shows a potential head-and-shoulder model that could signal much lower prices ahead of a 10-year period that is falling again:
After the peak in June, $ SPX fell by 7%, minor restrictions fell by more than 10%, and the banking index fell by more than 20%. These are significant steps in the direction of decline, and technology is increasingly at risk, and its strength is constantly weakening.
I outlined the reasons why the historic rally may have been bear market rally fueled to the extreme by unprecedented injections of liquidity and why Fed looks more and more burst trying to protect this market, not being able to prevent what banks and the bond market are already signaling: we are looking at the prospect of a protracted recession.
Markets are a journey, and every day they can be distracted from the big picture, so it is extremely important to carefully monitor technical charts and the development of macro data. My main point of view: there are many opportunities for exchanging for the long and short sides, since in the coming months, a battle breaks out between artificial liquidity interventions and the fundamental / valuation picture. But be clear: In June, the wider market made a lower high, and the path to a full economic recovery does not look like a clear V at all, while estimates remain at unprecedented levels during the recession.
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