End of the quarter.

"Stuck in the middle with you"

Where does the market go from here ?

Technically we have broken the support and the SP-500 chart is negative as we have a pattern of lower highs and lower lows, but...

Should stocks continue lower, Fed will most likely step in with accelerated levels of quantitative easing as they always have since the financial crash of 2008. But even if they don't, Trump can ultimately unlock $300 billion of unused stimulus without congressional approval if need be as he did in early August. During a news conference on September 4, Trump said another $300 billion in unused stimulus aid could be provided if Congress doesn't vote to redirect those funds.

Warning state.

                                                          If the Fed gives up, not good.

Sentiment over SPs

SP-500 closing price below 3300 should be significant, especially on a close below 3280. Unless there is such a breakdown, the SP-500 chart can still be considered to be bullish.

 

The state of the stock market.

From a technical standpoint, the market was extremely over-bought (and continues to be), so a pullback like this is very normal. There are plenty of non-normal things about the market right now, but a rapid pullback after a rapid rise is not one of them. If the pullback keeps going it could turn into another story, but it’s not there yet.

Until SP-500 breaks support at 3280, the SP chart will not be bearish.  If we break support, then a more severe downside move will most likely to follow.

If we don't hold today's low then "all bets are off", but if we do, possible blow-off top is next, stay alert.

"Theory of Reflexivity states that investors don't base decisions on reality, but rather on their perception of reality. The actions that result from these perceptions have an impact on reality which then affects investors' perceptions and thus prices."

Nasdaq exploring new high ground.

Nasdaq rallies into new high ground, but fewer and fewer stocks are supporting the rally. The % of Nasdaq stocks above their own 50-dma has been diverging as it did before market pullbacks in February 2019 and March 2020. "This suggests you should sell into a melt up"

The path of least resistance is to the upside.

In summary, there are no confirmed sell signals, as you can see the chart is strongly in an uptrend, but in the context, you need to stay alert to execute bearish signals, take positions if and when confirmed sell signals appear. Until then, stay bullish and enjoy the ride.

"I’ve always had the view that how successful you are is really a function of how you deal with failure. If you deal with failure well and you persist, you have a high probability of being successful."

Are you ready for tomorrow ?

Thursday, August 27. tomorrow at 6:10 AM PST, Chairman Powell will release a speech addressing the new policy framework for the Fed from a virtual Jackson Hole central bank meeting. This event has the potential to move market considerably--both up and down--if certain topics are addressed or not addressed.

Last week shortly after the release of the FOMC minutes, many of the markets that had demonstrably rallied (precious metals, Euro etc.) sold off sharply. The ostensible reason was the circumspect lines in the minutes vis-a-vis a the Fed's feelings towards a Yield Curve Control policy. None of this should have come as a surprise to markets but it highlights the chance for some intraday volatility and how the general lack of liquidity in the markets now can create some fireworks.

The trigger for a sell off tomorrow in gold and risk assets will be if Powell's speech inexplicably fails to address the openness of the Fed has to an inflation overshoot. 

The base case for most market participants is the Fed comes out and acknowledges their chronic failure to reach their inflation target of 2 percent, and that letting inflation run above this for some reasonable/unspecified time as deemed appropriate/consistent with the incoming data is wholly consistent with their mandate/new framework.

There is the possibility Powell's speech talks about more QE being needed and I think such mention could send the algos buying gold, however, the takeway I'm looking for is what can be gleaned in terms of how long the overshoot lasts.

In summary, SP's still look positive, that is the most important market indicator, and if SP-500 doesn't break support at 3200 the price trend will remain higher. So, there is no panic, SP-500 is trading around all time highs and it's all good for now, but you better be very observant next 4 to 6 weeks.

 

The post 1929 crash rally lasted 124 trading days. The post 9/11 rally lasted 121 trading days. Today is 106 trading days after the March 23, low.

 

"When you see better returns buying laggards, signs of a trading range environment."

The path of least resistance is still to the upside.

Enjoy the ride !

"A few things you need to achieve exceptional results"

1) Quantity: You take lots of shots.

2) Quality: You take thoughtful shots.

3) Consistency: You keep shooting for a long time.

4) Feedback. You take better shots over time.

5) Luck: You get a few favorable bounces.

In summary, the market seems to be running out of gas, but undeniably still going and holding above support. So the bulls remain in charge unless SP breaks down below support at 3200.

  

             On your long equity positions raise stops and enjoy the ride.

Today is officially three months before US election. Stocks have a good record, being right 87% of the time since Great Depression, of predicting who is going to win in November.

If stocks are up, the incumbent party wins. |If stocks are down, the incumbent party tends to lose.

In summary, the market seems a bit tired, but SP continues to hold above support. So the bulls remain in charge unless SP breaks down below support at 3130.

In summary, the market is deciding where to go from here to make a strong directional move. Markets move violently to their place, and calmly in place. For now that is a trading range market until one camp or the other can get enough momentum going to engineer a breakout.

The market is still bullish unless the support is broken.

Market still sidways, but don't complain:

“Sister, there are people who went to sleep all over the world last night, poor and rich and white and black, but they will never wake again. Sister, those who expected to rise did not, their beds became their cooling boards, and their blankets became their winding sheets. And those dead folks would give anything, anything at all for just five minutes of this... So you watch yourself about complaining, Sister. What you're supposed to do when you don't like a thing is change it. If you can't change it, change the way you think about it. Don't complain.”