2020’s Double Bubble Burst

INVESTOR’S first read.com – Daily edge before the open
DJIA: 27,386
S&P 500: 3,349
Nasdaq Comp.:11,108
Russell: 1,544
Friday August  7, 2020   
8:15 a.m.
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brooksie01@aol.com
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November 15, 2019 (DJIA – 28,004)   I Called for a bear market to start in January, that the initial plunge would be 12%-18% – “straight down.” It started mid-February, dropped 16.3%, rallied then  plunged another 32.8%.
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January 20, 2020 (DJIA:29,348) My blog,  “INSANITY,” projected a bear market decline of  30% – 45%. The DJIA plunged 38.4% in 21 days.
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With the DJIA at 18,591on March 24, I wrote that , while I see lower prices later in the year, I expect a big rally with the upside potential of DJIA 22,037 (S&P 500 : 2,617) – it went higher.
With the DJIA at 23,942 (S&P 500) on April 15, I
called for  an end to  rally, up 29% but well short of how far the rally extended.  On May 18, I began to warn of  Bubble #2
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Thursday’s “SELL – Phony Market, Phony Economy, Phony Administration” was based on the big picture – our quality of life, dismal future expectations and the  tumbling domino effect of a severely damaged economy.
As noted herein so many times, the stock market is so much more overvalued now based on time-tested yardsticks than it was in February before COVID-19 ravaged the economy as well as corporate earnings, save a few tech stocks.
Historically, it is more overvalued than at any time in the past.  That should give money managers pause to think about new commitments, since they have a fiduciary responsibility to protect portfolio values in addition to grow them, which under current circumstances is a crap shoot.
Yesterday, I said a brief run to new highs by the S&P 500 is possible before the market turns down. That high is 3,383, which means it only has to run 1.0% higher, or 34 points.  The tech-heavy Nasdaq Comp. rose 12.9% beyond the February  highs in June.
As you can see the remaining market indexes have a long way to go to hit new highs.
Appreciation needed to hit new highs
DJIA:  8.0%
Russell 2000: 11.1%
New York  Composite Index of 1,900 stocks: 11.4%
Dow Jones Transportation Index: 9.9%%
ValueLine Composite of 1,675 stocks, an “unweighted” index giving equal weight to each stock (-19.5%)
Bottom Line:
The Nasdaq is distorted by a handful of large market cap Tech stocks. While that is true to some extent for the S&P 500, this is the institutional benchmark index.  That said, it’s hitting an all-time high may attract enough volume to enable these behemoths to unload big positions.
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Leading Tech Stocks  –  Time to Lock In Profits
I began to track the following Tech stocks after projecting the lows they would hit in a decline that started July 21. They rebounded from these projections to close on August 6 at the following prices. At some point, institutions will want to begin locking in profits, since they all can’t sell at the same time…or will they ?
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Projected Lows on Friday, July 24     –  August 6 Close)

Facebook (FB): Projected low: 223  – Actual Low: 226    Close: 265
Amazon (AMZN): Projected low:2,887 – Actual Low:2,888   Close : 3,225
Apple (AAPL): Projected low: 363 – Actual Low: 356     Close: 455
Netflix (NFLX): Projected low: 466  – Actual Low: 467    Close: 509
Google (GOOG): Projected low: 1,486 -Actual Low: 1,488   Close: 1,500
Tesla (TSLA): Projected low 1,407  – Actual Low 1,366   Close: 1,489
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Eastman Kodak’s (KODK: 14.90)
Apparently, I was right about Eastman Kodak, originally noting “This one STINKS” and  warning, “something seems very wrong here.”
I am suspending coverage of Eastman Kodak (KODK)  pending an SEC investigation and a number of  investigations by law firms.
I published the following  starting Thursday July 30.
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KODAK
soared to $60 from $1.50 in two days as a result of the Trump administration’s $765 million loan to produce active pharmaceutical ingredients (API), most of which are currently produced abroad by China and India.
Suspicious to me was the jump to $10 from $1.50 Tuesday, July 24.
> After hitting $60 on Wednesday it closed at $33.20
> I started coverage on Thursday morning noting, “This One STINKS” and I said  it  looked like a $21 stock.
> Friday it closed at $21.85
> Monday morning,  August 3,  I warned of a spike down to $12.80, and  it closed at $14.95.
> Tuesday, I stuck to the $12.80 projection where I thought short sellers would cover and run it up to $19-$20. I believe they began to cover at the open yesterday with a high volume jump to $17.88 before slipping to my projected low $12.86, then closed at $14.40. Shorts may buy today bumping the stock up to $15.88.   (Which it did on Aug. 5)
Something seems very wrong here. I am covering it because there appears a need to better understand its market action. Unless there are currently  unknown fundamentals to justify strength, this stock could be headed much lower, perhaps below $7.
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Bottom Line:
In November, I called for a top for the 11-year old bull market to take place in January, but was a month early. It came in February. Without COVID, it may have come later. Throughout 2019, I warned of an inflating bubble, nurtured by the Fed which was in panic mode after the S&P 500 plunged 20% in Q4 2018 and the economy edged into a recession.
I may be early again, but more upside is really not justified, except by the fact investors see no alternative for a e return except stocks.  That’s fine, but poor timing can produce huge losses.
We are in the eye of the recession storm where current economic reports look like they are improving, because they are going up against severely depressed data.

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RECENT POSTS:
Thursday August 6, 2020 :  SELL ! Phony Market, Phony Economy, Phony Administration”

One of these days soon, the Stock market is going to reflect the misery and uncertainty millions and millions of Americans are forced to endure every  day.
The stock market has always been the great discounter of  looming trouble and opportunity, it is overdue for its verdict on this one.
Our economy is crumbling as  the tumbling domino effect  raises its ugly head, taking down, first businesses, then those who serve them, support them, benefit from their existence.
Look around you, walk around the block, step back and honestly acknowledge whether you feel good about your life in the paths of a killer pandemic and the incredible, partisan incompetence in the White House and Senate.

Then, ask the question that no investor, no executive on Wall Street, no one lounging on their deck in the Hamptons, or no politician dares to ask.

Why should the value of the companies comprising the major market averages sell at higher multiples than at any time in history ? Why should the stock market be the only place untouched by so much adversity ?

Does this not highlight the huge divide between  a small percent of Americans who are untouched, sheltered by layers of safety and isolation and the great majority of Americans who are living on the edge.
Reality dictates that it is the latter that give value to corporation’s stock. Undercut that support and corporation suffer from the unthinkable – slow, or no growth, or plunging earnings.
      What happens when that reality strikes ?
The Street panics   First, buyers vanish. Stocks drop just like they did in February and March.  Then come the sellers.  – The result is flash crash # 2  AND no rebound this time for many months, years.
BOTTOM LINE:
      A brief  run to new highs by the S&P 500 (3,392) is possible.
Yes data on the economy is coming in much improved, BUT THAT IS BECAUSE WE ARE IN THE “EYE” OF THE GREATEST STORM SINCE THE Great DEPRESSION , WHERE CURRENT DATA COMPARES WELL WITH RECENTLY DEPRESSED DATA.
      But the blinders have to come off, denial must yield to reality, and portfolio values  must be protected from the greatest double bubble burst of all time.
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Leading TECH Stocks  _- Time to lock in profits.
I will use the following reference point to track leading tech stocks. These are the prices which I projected these stocks would spike down to in my Friday, July 24 post. They rebounded the following Monday marking a key turning point.
HOWEVER, as leaders, they could signal a downturn in a market that is by time-tested benchmarks, very over valued.  That’s why they must be watched with a reference point – the July 24 correction low.
I think they are beginning to stall – Time to lock in profits
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Projected Lows (Friday, July 24 and August 3 Close)

Facebook (FB): Projected low: 223  – Actual Low: 226    Close: 249
Amazon (AMZN): Projected low:2,887 – Actual Low:2,888   Close : 3,205
Apple (AAPL): Projected low: 363 – Actual Low: 356     Close: 440
Netflix (NFLX): Projected low: 466  – Actual Low: 467    Close: 502
Google (GOOG): Projected low: 1,486 -Actual Low: 1,488   Close: 1,473
Tesla (TSLA): Projected low 1,407  – Actual Low 1,366   Close: 1,485
I replaced Microsoft (MSFT) with Tesla (TSLA)
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Wednesday  August 5, 2020 “Is Stock Market Up ?  Or Just a Few Tech Stocks ?
It’s all about how the market averages/Indexes are constructed, and especially what weightings are given in that construction.
The DJIA is “price weighted” where percentage changes in higher prices stocks like Apple (AAPL: 438)  nine times (9x) more weight than Cisco (CSCO:48).
This will change at the end of the month when Apple splits four-for-one, cutting its price down to generally to 109. United Healthcare (UNH: 304) will then be the highest priced stock in the DJIA.
The rest of the indexes are market value weighted (shares x price) giving the biggest companies more clout.
That leaves the ValueLine Composite which gives equal weight to each stock since it is an average of the percentage change in each of 1,675 stocks.  This is what is really happening to each stock.
The Nasdaq Comp. has mostly been driven by a handful of stocks (see below), which have powered the index 11.2% above the February highs.
The other indexes have yet to top the February  bull market highs prior to the 21-day, 35% plunge.
Why does it matter ?  Nasdaq’s surge past the February highs while all the other indexes are still below those highs gives a false impression of the market’s strength, gives a green light for investors to load up when, in the current case, that is a very dangerous thing to do.
Market Indexes Still Below February Highs
DJIA is down(- 9.3%)
S&P 500 (-2.3%)
Russell 2000 (-11.5%)
New York  Composite of 1,900 stocks (-11.1%)
Dow Jones Transportation Index (-11.2%)
ValueLine Composite of 1,675 stocks, an “unweighted” index giving equal weight to each stock (-17.2%)

Blomberg’s Barry Ritholtz’s  August 4, “Why Markets Don’t Seem to Care If the Economy Stinks” emphasizes why it matters.
He writes, “Most visible and economically vulnerable industries are also the smallest, based on market capitalization weight in major market indexes, such as the S&P 500.”  For added emphasis, he notes, the 30 most economically damaged industry categories could be de-listed…and it would hardly shave more than a few percentage points off the S&P 500.
Yet, look at the damage done to the stocks of these industries:
department stores (-62.6%), airlines (-55%), travel services (-51%), oil & gas equipment and services (-50%), resorts/casinos (-45%)hotel, real estate investment trusts (-42%).
Ritholtz says, these industries just don’t matter very  much to the stock market performance…the sectors that do matter are internet content, software infrastructure, consumer electronics and internet retailers account for $8 trillion in market value, close to 25% of the total U.S. stock market value of $35 trillion.
Take the 10 biggest technology companies in the S&P 500 and weight them equally and they would be up more than 37% for the year. Do the same for the other 490 companies in the index and they would be down 7.7%.
Leading TECH Stocks
I will use the following reference point to track leading tech stocks. These are the prices which I projected these stocks would spike down to in my Friday, July 24 post. They rebounded the following Monday marking a key turning point.
HOWEVER, as leaders, they could signal a downturn in a market that is by time-tested benchmarks, very over valued.  That’s why they must be watched with a reference point – the July 24 correction low.
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Projected Lows (Friday, July 24 and August 3 Close)

Facebook (FB): Projected low: 223  – Actual Low: 226    Close: 249
Amazon (AMZN): Projected low:2,887 – Actual Low:2,888   Close : 3,138
Apple (AAPL): Projected low: 363 – Actual Low: 356     Close: 438
Netflix (NFLX): Projected low: 466  – Actual Low: 467    Close: 509
Google (GOOG): Projected low: 1,486 -Actual Low: 1,488   Close: 1,464
Tesla (TSLA): Projected low 1,407  – Actual Low 1,366   Close: 1,464
I replaced Microsoft (MSFT) with Tesla (TSLA)
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Selected Technical observations:
(These are just chart reads (no fundamental input) -an observation that can change abruptly)
Apple
(AAPL:435) Acts well  – my “400 possible” up from a 384 close Thursday
was  an understatement. Chart looked really good, should have been more aggressive.  Slip to 427 possible. No Change.
Google (GOOG: 1,474 ) Still digesting Friday’s flash crash. Spike to 1,499 possible. Beware one-day reversal.   As warned, GOOG spiked to 1,490, sold down to 1,465.
Break below 1,460 raises possibility of further drop to 1,421. Resistance 1,486.
Tesla (TSLA:1,485) Struggling after Friday crunch.  As I warned, it spiked to 1,509 then consolidated with Support 1,469, Resistance 1,497 Risk: 1,412.
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Eastman Kodak’s (KODK: 14.40) stock soared to $60 from $1.50 in two days as a result of the Trump administration’s $765 million loan to produce active pharmaceutical ingredients (API), most of which are currently produced abroad by China and India.
Suspicious to me was the jump to $10 from $1.50 Tuesday, July 24.
> After hitting $60 on Wednesday it closed at $33.20
> I started coverage on Thursday morning noting, “This One STINKS” and I said  it  looked like a $21 stock.
> Friday it closed at $21.85
> Monday morning,  August 3,  I warned of a spike down to $12.80, and  it closed at $14.95.
> Tuesday, I stuck to the $12.80 projection where I thought short sellers would cover and run it up to $19-$20. I believe they began to cover at the open yesterday with a high volume jump to $17.88 before slipping to my projected low $12.86, then closed at $14.40. Shorts may buy today bumping the stock up to $15.88.
Something seems very wrong here. I am covering it because there appears a need to better understand its market action. Unless there are currently  unknown fundamentals to justify strength, this stock could be headed much lower, perhaps below $7.

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Tuesday  August 4, 2020 (DJIA: 26,664) “Bubbles Burst !”

This is Bubble #2. It will burst on its own, or be pricked like Bubble #1 in February which led to  a 21-day, 35% drop in the stock market.
Currently, the Street is bullish because it is looking beyond the COVID crisis to a full recovery.
      I accept a rebound from depressed lows in Q1 and Q2, but beyond that, why would there be enough economic growth to support an overvaluation  of stocks not ever seen except perhaps the dot-com bubble in 2000 ?
In Q4 of 2018, the S&P 500 was down 20% reflecting a 10-year old economy that was on the threshold of recession.  The Fed stepped in with QE type support and cuts in its benchmark federal funds interest rate and postponed the recession.
Why would  the economy expand now after so much internal damage has been done to the economy and consumer confidence by COVID-19 and measures to contain it ?
The Street is in denial or at least until November 4. The Fed has been an enabler to stock prices for at least 18 months and will continue to be at least until November 4 with its policy of “doing all it takes.”
On a given day, managers of equity portfolios, fully aware of the damage done to our economy, the overvaluation of stocks, the uncertainty of the intermediate-and long-term future, and their fiduciary responsibility to clients will stop buying and even sell – flash crash #2 – and it won’t be pretty, because it will be based on fundamentals.

 

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Bottom Line:
Bubbles can expand more and more as rising prices attract more and more buyers. They can only expand so far until they burst on their own, or are pricked like Bubble #1 in February.
This is Bubble #2, which can burst at any time.  Realistically, that can happen when buyers simply don’t show up, money managers who fearful of legal action for reckless investing with so many known negatives and so many unknowns. Stop buying, even lock in profits.
What to do:  Have enough cash reserve in line with your tolerance for risk. Yes, I know resisting going all-in is difficult, we are just humans with human flaws – greed and fear.  I am not alone here, I read  a lot of analyses, bull and  bear, most of it very impressive for detail and logic.  The bears have it by a long shot.
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Monday August 3, 2020 DJIA (26,428) “Grandest Blow Off Of All-Time”
No one wants to hear reason at market tops ……and bottoms, but here goes anyhow.
Baupost Group’s Seth Klarman is also a critic of the Fed’s nurturing of the stock market, as reported by Market Watch’s Shawn Langlois over the weekend.
In an effort to explain the disconnect between stock prices and reality,   Klarman faulted the Fed with treating  the Street  like foolish children, unable to rationally set security prices without intervening .  When the market has a tantrum, the benevolent Fed has a soothing yet enabling response, he said.
I have criticized the Fed for years but in particular ever since January 2019 when I believe it very subtly manipulated the stock market upward with claims the economy was in a good place (when it wasn’t ?) after it was teetering on the edge of a recession in Q4 with the S&P 500 down 20%.
Politics ?  Over zealous ?  Don’t know, but the Fed  owned Bubble #1 which COVID pricked in February, and yes, the market bounced back, but a 35% crunch hurt a lot of investors.  Now we are dealing with Bubble # 2 and the result will be the same.  I see a 30% – 45% flash crash, but expected it before now.
A healthy market is one where  stocks trade freely without outside manipulation.
I am not alone with my warnings.  A.Gary Shilling’s August 2020 “INSIGHT,”
noting that Treasurys have rallied in the past month, and if the earlier relationship holds, stocks are due for another spill. We foresee the recession extending into 2021, with the S&P 500 falling 30% to 40%.”
I have enormous respect for Gary and his editor  Fred T. Rossi.
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Last Friday I  projected levels where the following tech leaders would find Technology stocks have recouped the leadership role that has powered the recovery from the February/March flash crash lows.
Where to from here ?   After sharp declines, they rebounded from my projected lows. It is from these key lows, that we will get a continuing read on how well this group maintains its leadership.

Projected Lows (Friday, July 24 and July 31 Close)

Facebook (FB): Projected low: 223  – Actual Low: 226    Close: 253
Amazon (AMZN): Projected low:2,887 – Actual Low:2,888   Close : 3,164
Apple (AAPL): Projected low: 363 – Actual Low: 356     Close: 425
Netflix (NFLX): Projected low: 466  – Actual Low: 467    Close: 488
Google (GOOG): Projected low: 1,486 -Actual Low: 1,488   Close: 1,482
Tesla (TSLA): Projected low 1,407  – Actual Low 1,366    Close: 1,430
I replaced Microsoft (MSFT) with Tesla (TSLA)
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Selected Technical observations:
(These are just chart reads (no fundamental input) -an observation that can change abruptly)
Apple
(AAPL:425) Acts well  – my “400 possible” up from a 384 close Thursday
was  an understatement. Chart looked really good, should have been more aggressive.  Support now: 417, Resistance starts 439.
Google (GOOG: 1,482 ) digesting Friday’s flash crash. Spike to 1,499 possible. Beware one-day reversal.
Tesla (TSLA:1,430) Struggling after Friday crunch. Needs base. Beware of spike followed by reversal. Highly news sensitive
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Eastman Kodak’s (KODK) stock soared to $60 from $1.50 in two days as a result of the Trump administration’s $765 million loan to produce active pharmaceutical ingredients (API), most of which are currently produced abroad by China and India.
I am wary of the price action of this stock, concerned that certain investors may have become aware of the government loan in advance of the huge move in the stock.
I think it is a high risk stock, but will comment on its technical action since there is a lot of interest.
KODK (7/31: 21.85)
Lots of Red Bull fever here. Up 20-fold in three days, this is a story stock with very little story except it got a big loan to manufacture important pharmaceutical ingredients essential to the production of many drugs.
Technical (not fundamental) read. Dropped below my “must hold” level at 27.50 to reach my  “risk projection” of  19.75 – 21.00. No telling what “they” can do with this one.   Spike down to 12.80 possible if panic sets in on break below 20.
It’s hard to tell if this is designed to be pumped up or dumped.
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Bottom Line:
Just be aware that at some point this party will be over with the risk of a 30% – 45% crunch.  Bubble #2 –   Who has a pin ?
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Friday Jul 31, 2020 (DJIA: 36,313) “Fang Stocks Ready to Lead Again ?”

Q2 GDP declined 9.5% y/y or at a 32.9% annual rate, ugly, but not a surprise.  But that’s at an annual rate which assumes that rate will continue through four quarters, which it won’t.
Another 1.43 million Americans filed for unemployment benefits.
But in this environment, does anyone making big investment decisions know what to expect going forward ?   If not, how can they justify investment decisions for clients at levels of valuation  that have consistently turned the stock market down over 50 years  ?su               Last Friday I  projected levels where the following tech leaders would find support. After sharp declines, they rebounded from my projected lows.

Projected Lows (Friday, July 24 and Wednesday’s close)

Facebook (FB): Projected low: 223  – Actual Low: 226    Close: 253
Amazon (AMZN): Projected low:2,887 – Actual Low:2,888   Close : 3,164
Apple (AAPL): Projected low: 363 – Actual Low: 356     Close: 425
Netflix (NFLX): Projected low: 466  – Actual Low: 467    Close: 488
Google (GOOG): Projected low: 1,486 -Actual Low: 1,488   Close: 1,482
Tesla (TSLA): Projected low 1,407  – Actual Low 1,366    Close: 1,430
I replaced Microsoft (MSFT) with Tesla (TSLA)
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Technical observations:
Apple
(AAPL:425) Acts well, technically – my “400 possible” up from a 384 close
was  an understatement. Chart looked really good, should have been more aggressive.  Support now: 417, Resistance starts 439.
Google (GOOG: 1,482)New  support is 1,467
Netflix (NFLX: 488) Struggling between 479 and 493.
Tesla (TSLA:1,430) Backed off my resistance at 1519, broke my support
Downside is 1,397.
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Eastman Kodak’s (KODK) stock soared to $60 from $1.50 in two days as a result of the Trump administration’s $765 million loan to produce active pharmaceutical ingredients (API), most of which are currently produced abroad by China and India.
I am wary of the price action of this stock, concerned that certain investors may have become aware of the government loan in advance of the huge move in the stock.
I think it is a high risk stock, but will comment on its technical action since there is a lot of interest.
KODK (7/31: 21.85)
Lots of Red Bull fever here. Up 20-fold in three days, this is a story stock with very little story except it got a big loan to manufacture important pharmaceutical ingredients essential to the production of many drugs.
Technical (not fundamental) read. Dropped below my “must hold” level at 27.50 to reach my  risk of  19.75 – 21.00.  I can see a spike down to 12.80.

No where else to put money ?   Try telling a client that after a 30% -50% plunge in their portfolio.
Can’t happen – the Fed won’t let it, Congress won’t let it, or at least until after the November 3 elections.
The stock market has been  a discounter of present and perceived economic and investment conditions forever until now.
Typically the stock market runs to extremes of overvaluation and undervaluation depending on a host of variables,  including– domestic, international, monetary, fundamental, and economic conditions, none the least being psychology – fear/greed.
Current valuation of stocks defies all the rules. Worse yet, it does so at historically high valuations, which leaves little room for upside and a ton of risk on the downside.
        I have focused on the popular tech stocks, aka FAANG stocks, this week primarily because they are down from their  July 14 highs and are struggling to regain their role as leaders.

 

Bottom Line:
     With the ugly GDP and unemployment report out of the way, the Street feels comfortable with buying aggressively.  The Congressional hearings of tech companies was a ho-hummer, and they are ready to assume leadership again.
The Street is looking beyond the massive hit  our economy is taking to a continuation of the economic recovery.
       If that doesn’t happen, the market will plunge to levels that discount new  projections.
I see extreme vulnerability here, don’t think the Street is aware of the tumbling domino effect that lies ahead.   Just one industry’s woes can affect multiple industries and small businesses that are tied to it.
What to do:

Sit close to the exits and maintain a cash reserve in line with one’s tolerance for risk. As humans, that is tough to do when others are going all-in, even leveraging their investments.
When this sucker cracks, it will be straight down, another flash c rash – the new normal for corrections.
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Thursday, July 30, 2020  DJIA: 26,539) “Kodak: Can it Pass the Smell Test ?”
      Did you ever wonder what would happen to the market if the Fed did not continually nudge it when it weakens ?
Ever wonder how we can survive a crisis after this one
after the Fed and U.S. government have blown it all on this one.
Perhaps it should be given some thought, because on November 4, it will be a new ball game.  Our economy must be in horrendous shape.  Clearly the Fed thinks so, and most of Congress…………and I, as well.
The Street is betting the effort by the Fed and Congress  will be successful, that the damage done by  the pandemic will pass and the economic expansion will be on the mend.
That would be a good bet if the S&P 500 were 30% lower. At current levels it does not discount any adversity.
If the Street is wrong, we are faced with a horrendous bear market as the market probes for a level that discounts future prospects.
So many new investors at these overvalued levels will get pummeled. It would take years to get back even.  At great risk are investors who will need to tap their portfolio for big ticket items like a house, education, medical expenses, or for older people who will need to access it for retirement.
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Eastman Kodak (KODK)
       Eastman Kodak’s
stock soared to $60 from $1.50 two days as a result of the Trump administration’s $765 million loan to produce active pharmaceutical ingredients (API), most of which are currently produced abroad by China and India.
The loan, the first of its kind and sourced from Defense Production Act, is suspicious, since it could have been given to any number of drug companies that are already in the business.  The concept of producing these ingredients  here makes sense, since only 21% of the “essential ingredients”  for drugs are produced here.
More suspicious to me is the jump to $!0 from $1.50 at the open Tuesday followed by a surge to $60 in early trading Wednesday. Who knew about the contract in advance ?  Later in the day, Kodak’s stock settled back and closed at $33.20 yesterday.  Imagine paying $1.50 two days ago – imagine being the fool who paid $60 yesterday.
Looks like $21 is possible as traders scurry to log in gains. Sellers should come in the high 30’s.
This one STINKS !
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Last Friday I  projected levels where the following tech leaders would find support. After sharp declines, they rebounded from my projected lows.

Projected Lows (Friday, July 24 and Wednesday’s close)

Facebook (FB): Projected low: 223  – Actual Low: 226    Close: 230
Amazon (AMZN): Projected low:2,887 – Actual Low:2,888   Close : 3,000
Apple (AAPL): Projected low: 363 – Actual Low: 356     Close: 373
Netflix (NFLX): Projected low: 466  – Actual Low: 467    Close: 488
Google (GOOG): Projected low: 1,486 -Actual Low: 1,488   Close: 1,500
Tesla (TSLA): Projected low 1,407  – Actual Low 1,366    Close: 1,499
NOTE:
Netflix (NFLX: 488) looks lower now – 461 possible
Tesla (TSLA:1,499) can slip to 1,473
    These stocks must regain leadership in order to juice the rest of the stock market.  Weakness stands to trigger a sell-off in all stocks.
That leadership would be confirmed by moves across: Facebook
(241),
Amazon (3,190), Apple ( 387), Netflix (526), Google (1,570) , Tesla (1,606), which at this  point would be a stretch.
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Downside risk is: Facebook (FB-217), Amazon (AMZN – 2,757), Apple (AAPL – 348), Netflix (NFLX – 461), Google (GOOG – 1,440), Tesla  (TSLA – 1,310).
The direction of these tech dynamos is key to the direction of the market as a whole. Together they account for 20% of the price action of the S&P 500.
Bottom Line:
Tempted to go all in, the Robinhood investors are already there,
piling into KODK as it runs into the stratosphere.  I wish them well, but chasing a stock that risen twofold, fourfold, fortyfold in two days and has little to go for it but government funding, is going to burn you more often than not.  Such speculation is classic late-bull market euphoria.  While it is nice to see some old-time speculative interest versus this “watching paint dry” institutional  meandering, risks rise with prices, especially stocks that have little basis for investment.  OK, if you can buy KODK and sell it to someone else at a higher price, fine. However, eventually, someone will be left holding the bag as the stock vanishes.
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Wednesday  July 29, 2020  (DJIA: 26,379) “FAANG Stocks Need to Rebound….Or It Is Trouble”

.     It is hard  to explain the huge disconnect between the buoyant stock market and the economy  which is in recession and the ravages of COVID-19 which has infected 4.3 million and terrified everyone else.
Obviously, the Street is looking beyond the problem to a time when the economy rises out of recession and current stock prices are justified.
I don’t see it that way.  For one, COVID is crushing economies in our country and around the world.  Its impact stands to be long-lasting, even within  new treatments and  vaccines.
Then too, the S&P 500 was extremely overvalued before COVID and more so now with corporate earnings plummeting.  Additionally, we are faced with uncertainty about the result of the election in November and its impact on the economy, companies and lives.
Wall Street is betting that all is well – Don’t you !
The FAANG stocks listed below are looked upon as market leaders and for good reason, they have been hot when everything else is lukewarm.
Two weeks ago, they topped out with a dramatic one-day reversal closing at the lows for the day and trending down ever since. My blog next day (July 14), headlined, “Wall Street’s Darlings De-Fanged.”
Last Friday I  projected levels where the following tech leaders would find support. After sharp declines, they rebounded from my projected lows.

Projected Lows (Friday, July 24)

Facebook (FB): Projected low: 223  – Actual Low: 226    Close: 230
Amazon (AMZN): Projected low:2,887 – Actual Low:2,888   Close : 3,000
Apple (AAPL): Projected low: 363 – Actual Low: 356     Close: 373
Netflix (NFLX): Projected low: 466  – Actual Low: 467    Close: 488
Google (GOOG): Projected low: 1,486 -Actual Low: 1,488   Close: 1,500
Tesla (TSLA): Projected low 1,407  – Actual Low 1,366    Close: 1,476
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Facebook (FB), Amazon (AMZN), Apple (AAPL) and Google (GOOG) will report earnings Thursday.  Netflix (NFLX) and Tesla (TSLA) have already reported.
It is anyone’s guess how the Street will react to these reports.  If a company doesn’t “beat” by enough, its stock can tumble. Generally, the Street projects a bit on the low-end.
The rebound of these  stocks must be watched  closely and especially the reaction of those companies reporting this week.
These leaders must exceed the following prices in order to re-establish their leadership.  Falling short, suggests weakness which could spill over to the market as a whole.
Resistance That Must Be Overcome:
Facebook (241)
Amazon (3,190)
Apple ( 387)
Netflix (526)
Google (1,570)
Tesla (1,606).
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Downside risk from  here:
Facebook
(FB)   Tuesday close ( 230)    Risk (217)
Amazon (AMZN) Tuesday close: 3000   Risk (2757)
Apple (AAPL) Tuesday ☹373)   Risk (348)
Netflix (NFLX) Tuesday Close (488)    Risk (461)
Google (GOOG) Tuesday Close (1,500)   Risk (1,440)
Tesla  (TSLA)   Tuesday Close:  1,476   Risk (1,310)
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Bottom Line:
At some point, the stock market must adjust for adversity and uncertainty.
Technically, it is as if the market has crawled far out on a limb which will snap at some point, leading to another flash crash.
The swing factor will be the realization that a “V” recovery is not in the cards, that it will be more like an “L.,” which I have been saying for many months.
Fed Chief Powell has centerstage at 2:30 today, with no surprises. The orchestrater of Bubble #1 (December 2018 – February 2020), Powell has appeared to me to be an enabler of Republicans holding on to Senate control, even re-electing President Trump, so anything can happen.
I just think buyers will be a “no show” some day, as money managers realize how deeply our economy has been impacted and how far into  the future the problems will persist.  That would result in another flash crash (new normal).
Currently, I see a flash crash impacting the market averages as follows.
DJIA 21,500,   S&P 500: 2,534,  Nasdaq Comp. 8,028.  With major plunges, the extent is determined by what new negatives impact  the downside momentum as stocks are tumbling, and especially at those junctures where the market is attempting to find support and rebound.

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Tuesday  July 28, 2020  (DJIA: 26,584) “I Was Wrong ! The Market’s Plunge Did Not Start July 27,  But It Is Coming – Flash Crash #2
Monday July 27, the day I said  the market would begin its plunge into the fall came and went with a rise in the market averages, not a plunge.
I am undeterred in my belief it will come.
      If I can take credit for anything, it was my pinpoint  of Friday’s correction lows on of the following.  After sharp declines in early trading, these tech leaders rebounded nicely from those lows  Friday and rose again yesterday.
Facebook (FB): Projected low: 223  – Actual Low: 226    Close: 233  today
Amazon (AMZN): Projected low:2,887 – Actual Low:2,888   Close : 3,055 today
Apple (AAPL): Projected low: 363 – Actual Low: 356     Close: 379 today
Netflix (NFLX): Projected low: 466  – Actual Low: 467    Close: 495 today
Google (GOOG): Projected low: 1,486 -Actual Low: 1,488   Close: 1,530 today
Tesla (TSLA): Projected low 1,407  – Actual Low 1,366    Close: 1,539 today

These have been the market leaders for  months, driving the Nasdaq Comp. to new all-time highs when the DJIA and S&P 500 did not.
But they  turned down after  dramatic one-day reversals two weeks ago.
This week we will get a big test of their leadership as  Q2 earnings get posted.
Facebook (FB) reports earnings on Wednesday; Amazon (AMZN), Apple (AAPL) and Google (GOOG) report Thursday.  Netflix (NFLX) and Tesla (TSLA) have already reported.
The rebound of these  stocks must be watched  closely and especially the reaction of the companies reporting this week.
These leaders must exceed the following prices in order to re-establish their leadership.  Falling short, suggests weakness which could spill over to the market as a whole.
Resistance That Must Be overcome:
Facebook (241), Amazon (3,190), Apple ( 387), Netflix (526), Google (1,570) Tesla (1,606).
Bottom Line:
It is just a matter of time  until a few BIG hitters walk away, worse yet sell in-size,  and it is LIGHTS OUT.  Everyone will scramble to find a buyer for their stock – Flash Crash #2  !
Here is what is hard to understand. Knowing the historic overvaluation of most stocks, the unpredictably of COVID-19, the political unrest in our country, and potential for a severe recession/depression, how money managers can justify buying at these levels without incurring legal blowback if the market crashes.
Rally failures would be a sign that the BIG money is selling.
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Recent headlines:
“Bear Market Rally Top Looms”  (July 9 )
Bubble Burst Looms !  COVID-19 Repeat”   (July 10)
One More Spike Before Fall Plunge”   (July 13)
“Wall Street’s Darlings De-Fanged”  (July14)
Vaccine – a Gamer Changer ?”   (July 15)
“Market Turns Down July 27”  (July 16)
One More Push Before a Crunch ?”   (July 20)
“Rally to Set Up Correction”   (July 21)
“At Some Point: Market to Open – No Buyers in Sight”   (July 22)
“Last Push Before Bubble Bursts (July 27 ??)  (July 23)
“FAANG Stocks Floundering”   (July 24)
“Risk Surging in Overvalued Market”  (July 27)
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Monday, July 27, 2020 (DJIA: 26,469) “Risk Surging in Overvalued Market”
     For months I have warned that a  correction into the fall would develop, and two weeks ago I said it would start on July 27 – today.
If I am wrong about the 27th,
 I erred by going with my “gut” about a specific day, NOT that a plunge into the fall won’t happen.  It will.
Friday, I called for a spike down in the FAANG stocks, picking the price level where I expected them to rebound from, which they did.
Facebook (FB): 223  – Low: 226    Close: 230
Amazon (AMZN): 2,887 – Low:2,888     Close: 3,008
Apple (AAPL):363 – Low: 356     Close: 370
Netflix (NFLX):466  – Low: 467      Close: 480
Google (GOOG):1,486  – Low: 1,488   Close: 1,511
Tesla (TSLA):1,407  –  Low 1,366    Close: 1,417
As noted Friday, the rebound of these stocks must be watched closely. Failure to bounce sharply would be a huge warning signal for the group and market as a whole.
Danger of Disconnect:
The Street’s disconnect with what has happened, is happening and an unpredictable future, has created a highly dangerous situation, unlike anything I have seen in 58 years in this business, 52 years as a writer.
Knowing the historic overvaluation of most stocks, the unpredictably of COVID-19, the political unrest in our country, and potential for a severe recession/depression, I question how money managers can justify buying at these levels without incurring legal blowback if the market crashes.
If just a few BIG hitters walk away, worse yet sell in-size, it is LIGHTS OUT.  Everyone will scramble to find a buyer for their stock – Flash Crash #2
Look, I am not a card-carrying bear, but we are tiptoeing through a minefield here with the market close to all-time highs.   There is no guarantee that we will get an “all’s well,” when COVID is under control.  Dominos will tumble for a long time.
       I think the Street’s algos have it wrong.   Unfortunately, this is what an 11-year old Fed-nurtured economic expansion and bull market will do for objective analysis.
Stuff happens.  Between 1968 and 1981 we had four recessions and six bear markets which included domestic, international  and political upheavals – comparable in many ways to today. . The Price/earnings ratio for the bluest of chips hit single digits !
What Can “Temporarily” Delay a Sell Off :
> Effective treatment and vaccine for COVID  -19 though many months away.
> Earnings that are reported as better than expected because the projections were low-balled in the first place.
> Expect hype by the Fed, Administration and Street, on the economy and especially on  a vaccine in effort to prop the market before November 3.
> Fed or Congressional stimulus. While helping individuals and institutions, the  dire need  for yet another program highlights the deepness of our problems.
Robinhood:
      Much is reported about how well the so-called Robinhood investors are doing. While dissed as newbies, novices, inexperienced, “oddlotters”, they are making money by “buying low, and selling high,” not in penny stocks, but tech stocks, airlines, stay-at-homes, breaking news stocks, etc..
Yesterday, Bloomberg quoted Bespoke Investment Group as noting how the newbie traders were buying the dip, not even afraid to jump on companies with serious financial problems.
One warning here for these gutsy traders who you can’t help but like. There will be a dip in the market that looks like a “gift”.   Instead, it will be the kiss of death for one’s trading portfolio …… if highly leveraged – worse.
That will be the dip before a flash crash that does not snap back quickly, a bear market, or depending on how one sees this one, the test of the March lows.
So far, it has paid off for these shooters to stretch a single into a double, but the risk of test of the March 23 lows looms.
What to do:  If it works, don’t change it, but don’t get greedy and….sit close to the exit.  Cash is an investment when risks are high. For one, it protects portfolio values in the event of a flash crash (new normal), two, it can be tapped if the market craters and gives investors a “dip”…. of 30% – 45%.
Bottom Line:
At these levels, price earnings that rank with the highest ever, the market does not discount current and future adversity, not even close.  These conditions breed another flash crash, if not today, in the near future.
Rallies must be watched for indications that they lack conviction.
Rally failures are deadly, as they reflect buyers are using strength to sell.
There will be a lot of hype and misinformation as the election approaches and it can trigger rallies – beware.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>                                                      
George Brooks
Investor’s first read.com
brooksie01@aol.com
A Game-On Analysis, LLC publication
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Investor’s first read, is a Game-On Analysis, LLC publication for which George Brooks is sole owner, manager and writer.  Neither Game-On Analysis, LLC, nor George  Brooks  is  registered as an investment advisor.  Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. References to specific securities should not be construed  as particularized or as investment advice as recommendations that you or any investors purchase or sell these securities on their own account. Readers are expected to assume full responsibility for conducting their own research pursuant to investment in keeping with their tolerance for risk.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SELL ! Phony Stock Market, Phony Economy, Phony Administration

INVESTOR’S first read.com – Daily edge before the open
DJIA: 27,201
S&P 500: 3,327
Nasdaq Comp.:10,998
Russell: 1,546
Thursday August  6, 2020   
7:15 a.m.
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brooksie01@aol.com
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November 15, 2019 (DJIA – 28,004)   I Called for a bear market to start in January, that the initial plunge would be 12%-18% – “straight down.” It started mid-February, dropped 16.3%, rallied then  plunged another 32.8%.
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January 20, 2020 (DJIA:29,348) My blog,  “INSANITY,” projected a bear market decline of  30% – 45%. The DJIA plunged 38.4% in 21 days.
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With the DJIA at 18,591on March 24, I wrote that , while I see lower prices later in the year, I expect a big rally with the upside potential of DJIA 22,037 (S&P 500 : 2,617) – it went higher.
With the DJIA at 23,942 (S&P 500) on April 15, I
called for  an end to  rally, up 29% but well short of how far the rally extended.  On May 18, I began to warn of  Bubble #2
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One of these days soon, the Stock market is going to reflect the misery and uncertainty millions and millions of Americans are forced to endure every  day.
The stock market has always been the great discounter of  looming trouble and opportunity, it is overdue for its verdict on this one.
Our economy is crumbling as  the tumbling domino effect  raises its ugly head, taking down, first businesses, then those who serve them, support them, benefit from their existence.
Look around you, walk around the block, step back and honestly acknowledge whether you feel good about your life in the paths of a killer pandemic and the incredible, partisan incompetence in the White House and Senate.

Then, ask the question that no investor, no executive on Wall Street, no one lounging on their deck in the Hamptons, or no politician dares to ask.

Why should the value of the companies comprising the major market averages sell at higher multiples than at any time in history ? Why should the stock market be the only place untouched by so much adversity ?

Does this not highlight the huge divide between  a small percent of Americans who are untouched, sheltered by layers of safety and isolation and the great majority of Americans who are living on the edge.
Reality dictates that it is the latter that give value to corporation’s stock. Undercut that support and corporation suffer from the unthinkable – slow, or no growth, or plunging earnings.
      What happens when that reality strikes ?
The Street panics   First, buyers vanish. Stocks drop just like they did in February and March.  Then come the sellers.  – The result is flash crash # 2  AND no rebound this time for many months, years.
BOTTOM LINE:
      A brief  run to new highs by the S&P 500 (3,392) is possible.
Yes data on the economy is coming in much improved, BUT THAT IS BECAUSE WE ARE IN THE “EYE” OF THE GREATEST STORM SINCE THE Great DEPRESSION , WHERE CURRENT DATA COMPARES WELL WITH RECENTLY DEPRESSED DATA.
      But the blinders have to come off, denial must yield to reality, and portfolio values  must be protected from the greatest double bubble burst of all time.
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Leading TECH Stocks  _- Time to lock in profits.
I will use the following reference point to track leading tech stocks. These are the prices which I projected these stocks would spike down to in my Friday, July 24 post. They rebounded the following Monday marking a key turning point.
HOWEVER, as leaders, they could signal a downturn in a market that is by time-tested benchmarks, very over valued.  That’s why they must be watched with a reference point – the July 24 correction low.
I think they are beginning to stall – Time to lock in profits
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Projected Lows (Friday, July 24 and August 3 Close)

Facebook (FB): Projected low: 223  – Actual Low: 226    Close: 249
Amazon (AMZN): Projected low:2,887 – Actual Low:2,888   Close : 3,205
Apple (AAPL): Projected low: 363 – Actual Low: 356     Close: 440
Netflix (NFLX): Projected low: 466  – Actual Low: 467    Close: 502
Google (GOOG): Projected low: 1,486 -Actual Low: 1,488   Close: 1,473
Tesla (TSLA): Projected low 1,407  – Actual Low 1,366   Close: 1,485
I replaced Microsoft (MSFT) with Tesla (TSLA)
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Eastman Kodak’s (KODK: 14.90)
Apparently, I was right about Eastman Kodak, originally noting “This one STINKS” and  warning, “something seems very wrong here.”
I am suspending coverage of Eastman Kodak (KODK)  pending an SEC investigation and a number of  investigations by law firms.
I published the following  starting Thursday July 30.
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KODAK
soared to $60 from $1.50 in two days as a result of the Trump administration’s $765 million loan to produce active pharmaceutical ingredients (API), most of which are currently produced abroad by China and India.
Suspicious to me was the jump to $10 from $1.50 Tuesday, July 24.
> After hitting $60 on Wednesday it closed at $33.20
> I started coverage on Thursday morning noting, “This One STINKS” and I said  it  looked like a $21 stock.
> Friday it closed at $21.85
> Monday morning,  August 3,  I warned of a spike down to $12.80, and  it closed at $14.95.
> Tuesday, I stuck to the $12.80 projection where I thought short sellers would cover and run it up to $19-$20. I believe they began to cover at the open yesterday with a high volume jump to $17.88 before slipping to my projected low $12.86, then closed at $14.40. Shorts may buy today bumping the stock up to $15.88.   (Which it did on Aug. 5)
Something seems very wrong here. I am covering it because there appears a need to better understand its market action. Unless there are currently  unknown fundamentals to justify strength, this stock could be headed much lower, perhaps below $7.

 

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RECENT POSTS:
Wednesday  August 5, 2020 “Is Stock Market Up ?  Or Just a Few Tech Stocks ?
It’s all about how the market averages/Indexes are constructed, and especially what weightings are given in that construction.
The DJIA is “price weighted” where percentage changes in higher prices stocks like Apple (AAPL: 438)  nine times (9x) more weight than Cisco (CSCO:48).
This will change at the end of the month when Apple splits four-for-one, cutting its price down to generally to 109. United Healthcare (UNH: 304) will then be the highest priced stock in the DJIA.
The rest of the indexes are market value weighted (shares x price) giving the biggest companies more clout.
That leaves the ValueLine Composite which gives equal weight to each stock since it is an average of the percentage change in each of 1,675 stocks.  This is what is really happening to each stock.
The Nasdaq Comp. has mostly been driven by a handful of stocks (see below), which have powered the index 11.2% above the February highs.
The other indexes have yet to top the February  bull market highs prior to the 21-day, 35% plunge.
Why does it matter ?  Nasdaq’s surge past the February highs while all the other indexes are still below those highs gives a false impression of the market’s strength, gives a green light for investors to load up when, in the current case, that is a very dangerous thing to do.
Market Indexes Still Below February Highs
DJIA is down(- 9.3%)
S&P 500 (-2.3%)
Russell 2000 (-11.5%)
New York  Composite of 1,900 stocks (-11.1%)
Dow Jones Transportation Index (-11.2%)
ValueLine Composite of 1,675 stocks, an “unweighted” index giving equal weight to each stock (-17.2%)

Blomberg’s Barry Ritholtz’s  August 4, “Why Markets Don’t Seem to Care If the Economy Stinks” emphasizes why it matters.
He writes, “Most visible and economically vulnerable industries are also the smallest, based on market capitalization weight in major market indexes, such as the S&P 500.”  For added emphasis, he notes, the 30 most economically damaged industry categories could be de-listed…and it would hardly shave more than a few percentage points off the S&P 500.
Yet, look at the damage done to the stocks of these industries:
department stores (-62.6%), airlines (-55%), travel services (-51%), oil & gas equipment and services (-50%), resorts/casinos (-45%)hotel, real estate investment trusts (-42%).
Ritholtz says, these industries just don’t matter very  much to the stock market performance…the sectors that do matter are internet content, software infrastructure, consumer electronics and internet retailers account for $8 trillion in market value, close to 25% of the total U.S. stock market value of $35 trillion.
Take the 10 biggest technology companies in the S&P 500 and weight them equally and they would be up more than 37% for the year. Do the same for the other 490 companies in the index and they would be down 7.7%.
Leading TECH Stocks
I will use the following reference point to track leading tech stocks. These are the prices which I projected these stocks would spike down to in my Friday, July 24 post. They rebounded the following Monday marking a key turning point.
HOWEVER, as leaders, they could signal a downturn in a market that is by time-tested benchmarks, very over valued.  That’s why they must be watched with a reference point – the July 24 correction low.
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Projected Lows (Friday, July 24 and August 3 Close)

Facebook (FB): Projected low: 223  – Actual Low: 226    Close: 249
Amazon (AMZN): Projected low:2,887 – Actual Low:2,888   Close : 3,138
Apple (AAPL): Projected low: 363 – Actual Low: 356     Close: 438
Netflix (NFLX): Projected low: 466  – Actual Low: 467    Close: 509
Google (GOOG): Projected low: 1,486 -Actual Low: 1,488   Close: 1,464
Tesla (TSLA): Projected low 1,407  – Actual Low 1,366   Close: 1,464
I replaced Microsoft (MSFT) with Tesla (TSLA)
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Selected Technical observations:
(These are just chart reads (no fundamental input) -an observation that can change abruptly)
Apple (AAPL:435) Acts well  – my “400 possible” up from a 384 close Thursday
was  an understatement. Chart looked really good, should have been more aggressive.  Slip to 427 possible. No Change.
Google (GOOG: 1,474 ) Still digesting Friday’s flash crash. Spike to 1,499 possible. Beware one-day reversal.   As warned, GOOG spiked to 1,490, sold down to 1,465.
Break below 1,460 raises possibility of further drop to 1,421. Resistance 1,486.
Tesla (TSLA:1,485) Struggling after Friday crunch.  As I warned, it spiked to 1,509 then consolidated with Support 1,469, Resistance 1,497 Risk: 1,412.
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Eastman Kodak’s (KODK: 14.40) stock soared to $60 from $1.50 in two days as a result of the Trump administration’s $765 million loan to produce active pharmaceutical ingredients (API), most of which are currently produced abroad by China and India.
Suspicious to me was the jump to $10 from $1.50 Tuesday, July 24.
> After hitting $60 on Wednesday it closed at $33.20
> I started coverage on Thursday morning noting, “This One STINKS” and I said  it  looked like a $21 stock.
> Friday it closed at $21.85
> Monday morning,  August 3,  I warned of a spike down to $12.80, and  it closed at $14.95.
> Tuesday, I stuck to the $12.80 projection where I thought short sellers would cover and run it up to $19-$20. I believe they began to cover at the open yesterday with a high volume jump to $17.88 before slipping to my projected low $12.86, then closed at $14.40. Shorts may buy today bumping the stock up to $15.88.
Something seems very wrong here. I am covering it because there appears a need to better understand its market action. Unless there are currently  unknown fundamentals to justify strength, this stock could be headed much lower, perhaps below $7.

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Tuesday  August 4, 2020 (DJIA: 26,664) “Bubbles Burst !”

This is Bubble #2. It will burst on its own, or be pricked like Bubble #1 in February which led to  a 21-day, 35% drop in the stock market.
Currently, the Street is bullish because it is looking beyond the COVID crisis to a full recovery.
      I accept a rebound from depressed lows in Q1 and Q2, but beyond that, why would there be enough economic growth to support an overvaluation  of stocks not ever seen except perhaps the dot-com bubble in 2000 ?
In Q4 of 2018, the S&P 500 was down 20% reflecting a 10-year old economy that was on the threshold of recession.  The Fed stepped in with QE type support and cuts in its benchmark federal funds interest rate and postponed the recession.
Why would  the economy expand now after so much internal damage has been done to the economy and consumer confidence by COVID-19 and measures to contain it ?
The Street is in denial or at least until November 4. The Fed has been an enabler to stock prices for at least 18 months and will continue to be at least until November 4 with its policy of “doing all it takes.”
On a given day, managers of equity portfolios, fully aware of the damage done to our economy, the overvaluation of stocks, the uncertainty of the intermediate-and long-term future, and their fiduciary responsibility to clients will stop buying and even sell – flash crash #2 – and it won’t be pretty, because it will be based on fundamentals.

 

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Bottom Line:
Bubbles can expand more and more as rising prices attract more and more buyers. They can only expand so far until they burst on their own, or are pricked like Bubble #1 in February.
This is Bubble #2, which can burst at any time.  Realistically, that can happen when buyers simply don’t show up, money managers who fearful of legal action for reckless investing with so many known negatives and so many unknowns. Stop buying, even lock in profits.
What to do:  Have enough cash reserve in line with your tolerance for risk. Yes, I know resisting going all-in is difficult, we are just humans with human flaws – greed and fear.  I am not alone here, I read  a lot of analyses, bull and  bear, most of it very impressive for detail and logic.  The bears have it by a long shot.
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Monday August 3, 2020 DJIA (26,428) “Grandest Blow Off Of All-Time”
No one wants to hear reason at market tops ……and bottoms, but here goes anyhow.
Baupost Group’s Seth Klarman is also a critic of the Fed’s nurturing of the stock market, as reported by Market Watch’s Shawn Langlois over the weekend.
In an effort to explain the disconnect between stock prices and reality,   Klarman faulted the Fed with treating  the Street  like foolish children, unable to rationally set security prices without intervening .  When the market has a tantrum, the benevolent Fed has a soothing yet enabling response, he said.
I have criticized the Fed for years but in particular ever since January 2019 when I believe it very subtly manipulated the stock market upward with claims the economy was in a good place (when it wasn’t ?) after it was teetering on the edge of a recession in Q4 with the S&P 500 down 20%.
Politics ?  Over zealous ?  Don’t know, but the Fed  owned Bubble #1 which COVID pricked in February, and yes, the market bounced back, but a 35% crunch hurt a lot of investors.  Now we are dealing with Bubble # 2 and the result will be the same.  I see a 30% – 45% flash crash, but expected it before now.
A healthy market is one where  stocks trade freely without outside manipulation.
I am not alone with my warnings.  A.Gary Shilling’s August 2020 “INSIGHT,”
noting that Treasurys have rallied in the past month, and if the earlier relationship holds, stocks are due for another spill. We foresee the recession extending into 2021, with the S&P 500 falling 30% to 40%.”
I have enormous respect for Gary and his editor  Fred T. Rossi.
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Last Friday I  projected levels where the following tech leaders would find Technology stocks have recouped the leadership role that has powered the recovery from the February/March flash crash lows.
Where to from here ?   After sharp declines, they rebounded from my projected lows. It is from these key lows, that we will get a continuing read on how well this group maintains its leadership.

Projected Lows (Friday, July 24 and July 31 Close)

Facebook (FB): Projected low: 223  – Actual Low: 226    Close: 253
Amazon (AMZN): Projected low:2,887 – Actual Low:2,888   Close : 3,164
Apple (AAPL): Projected low: 363 – Actual Low: 356     Close: 425
Netflix (NFLX): Projected low: 466  – Actual Low: 467    Close: 488
Google (GOOG): Projected low: 1,486 -Actual Low: 1,488   Close: 1,482
Tesla (TSLA): Projected low 1,407  – Actual Low 1,366    Close: 1,430
I replaced Microsoft (MSFT) with Tesla (TSLA)
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Selected Technical observations:
(These are just chart reads (no fundamental input) -an observation that can change abruptly)
Apple (AAPL:425) Acts well  – my “400 possible” up from a 384 close Thursday
was  an understatement. Chart looked really good, should have been more aggressive.  Support now: 417, Resistance starts 439.
Google (GOOG: 1,482 ) digesting Friday’s flash crash. Spike to 1,499 possible. Beware one-day reversal.
Tesla (TSLA:1,430) Struggling after Friday crunch. Needs base. Beware of spike followed by reversal. Highly news sensitive
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>.
      Eastman Kodak’s (KODK) stock soared to $60 from $1.50 in two days as a result of the Trump administration’s $765 million loan to produce active pharmaceutical ingredients (API), most of which are currently produced abroad by China and India.
I am wary of the price action of this stock, concerned that certain investors may have become aware of the government loan in advance of the huge move in the stock.
I think it is a high risk stock, but will comment on its technical action since there is a lot of interest.
KODK (7/31: 21.85)
Lots of Red Bull fever here. Up 20-fold in three days, this is a story stock with very little story except it got a big loan to manufacture important pharmaceutical ingredients essential to the production of many drugs.
Technical (not fundamental) read. Dropped below my “must hold” level at 27.50 to reach my  “risk projection” of  19.75 – 21.00. No telling what “they” can do with this one.   Spike down to 12.80 possible if panic sets in on break below 20.
It’s hard to tell if this is designed to be pumped up or dumped.
……………………………………………………………..
Bottom Line:
Just be aware that at some point this party will be over with the risk of a 30% – 45% crunch.  Bubble #2 –   Who has a pin ?
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Friday Jul 31, 2020 (DJIA: 36,313) “Fang Stocks Ready to Lead Again ?”

Q2 GDP declined 9.5% y/y or at a 32.9% annual rate, ugly, but not a surprise.  But that’s at an annual rate which assumes that rate will continue through four quarters, which it won’t.
Another 1.43 million Americans filed for unemployment benefits.
But in this environment, does anyone making big investment decisions know what to expect going forward ?   If not, how can they justify investment decisions for clients at levels of valuation  that have consistently turned the stock market down over 50 years  ?su               Last Friday I  projected levels where the following tech leaders would find support. After sharp declines, they rebounded from my projected lows.

Projected Lows (Friday, July 24 and Wednesday’s close)

Facebook (FB): Projected low: 223  – Actual Low: 226    Close: 253
Amazon (AMZN): Projected low:2,887 – Actual Low:2,888   Close : 3,164
Apple (AAPL): Projected low: 363 – Actual Low: 356     Close: 425
Netflix (NFLX): Projected low: 466  – Actual Low: 467    Close: 488
Google (GOOG): Projected low: 1,486 -Actual Low: 1,488   Close: 1,482
Tesla (TSLA): Projected low 1,407  – Actual Low 1,366    Close: 1,430
I replaced Microsoft (MSFT) with Tesla (TSLA)
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Technical observations:
Apple
(AAPL:425) Acts well, technically – my “400 possible” up from a 384 close
was  an understatement. Chart looked really good, should have been more aggressive.  Support now: 417, Resistance starts 439.
Google (GOOG: 1,482)New  support is 1,467
Netflix (NFLX: 488) Struggling between 479 and 493.
Tesla (TSLA:1,430) Backed off my resistance at 1519, broke my support
Downside is 1,397.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>.
      Eastman Kodak’s (KODK) stock soared to $60 from $1.50 in two days as a result of the Trump administration’s $765 million loan to produce active pharmaceutical ingredients (API), most of which are currently produced abroad by China and India.
I am wary of the price action of this stock, concerned that certain investors may have become aware of the government loan in advance of the huge move in the stock.
I think it is a high risk stock, but will comment on its technical action since there is a lot of interest.
KODK (7/31: 21.85)
Lots of Red Bull fever here. Up 20-fold in three days, this is a story stock with very little story except it got a big loan to manufacture important pharmaceutical ingredients essential to the production of many drugs.
Technical (not fundamental) read. Dropped below my “must hold” level at 27.50 to reach my  risk of  19.75 – 21.00.  I can see a spike down to 12.80.

No where else to put money ?   Try telling a client that after a 30% -50% plunge in their portfolio.
Can’t happen – the Fed won’t let it, Congress won’t let it, or at least until after the November 3 elections.
The stock market has been  a discounter of present and perceived economic and investment conditions forever until now.
Typically the stock market runs to extremes of overvaluation and undervaluation depending on a host of variables,  including– domestic, international, monetary, fundamental, and economic conditions, none the least being psychology – fear/greed.
Current valuation of stocks defies all the rules. Worse yet, it does so at historically high valuations, which leaves little room for upside and a ton of risk on the downside.
        I have focused on the popular tech stocks, aka FAANG stocks, this week primarily because they are down from their  July 14 highs and are struggling to regain their role as leaders.

 

Bottom Line:
     With the ugly GDP and unemployment report out of the way, the Street feels comfortable with buying aggressively.  The Congressional hearings of tech companies was a ho-hummer, and they are ready to assume leadership again.
The Street is looking beyond the massive hit  our economy is taking to a continuation of the economic recovery.
       If that doesn’t happen, the market will plunge to levels that discount new  projections.
I see extreme vulnerability here, don’t think the Street is aware of the tumbling domino effect that lies ahead.   Just one industry’s woes can affect multiple industries and small businesses that are tied to it.
What to do:

Sit close to the exits and maintain a cash reserve in line with one’s tolerance for risk. As humans, that is tough to do when others are going all-in, even leveraging their investments.
When this sucker cracks, it will be straight down, another flash c rash – the new normal for corrections.
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Thursday, July 30, 2020  DJIA: 26,539) “Kodak: Can it Pass the Smell Test ?”
      Did you ever wonder what would happen to the market if the Fed did not continually nudge it when it weakens ?
Ever wonder how we can survive a crisis after this one
after the Fed and U.S. government have blown it all on this one.
Perhaps it should be given some thought, because on November 4, it will be a new ball game.  Our economy must be in horrendous shape.  Clearly the Fed thinks so, and most of Congress…………and I, as well.
The Street is betting the effort by the Fed and Congress  will be successful, that the damage done by  the pandemic will pass and the economic expansion will be on the mend.
That would be a good bet if the S&P 500 were 30% lower. At current levels it does not discount any adversity.
If the Street is wrong, we are faced with a horrendous bear market as the market probes for a level that discounts future prospects.
So many new investors at these overvalued levels will get pummeled. It would take years to get back even.  At great risk are investors who will need to tap their portfolio for big ticket items like a house, education, medical expenses, or for older people who will need to access it for retirement.
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Eastman Kodak (KODK)
       Eastman Kodak’s stock soared to $60 from $1.50 two days as a result of the Trump administration’s $765 million loan to produce active pharmaceutical ingredients (API), most of which are currently produced abroad by China and India.
The loan, the first of its kind and sourced from Defense Production Act, is suspicious, since it could have been given to any number of drug companies that are already in the business.  The concept of producing these ingredients  here makes sense, since only 21% of the “essential ingredients”  for drugs are produced here.
More suspicious to me is the jump to $!0 from $1.50 at the open Tuesday followed by a surge to $60 in early trading Wednesday. Who knew about the contract in advance ?  Later in the day, Kodak’s stock settled back and closed at $33.20 yesterday.  Imagine paying $1.50 two days ago – imagine being the fool who paid $60 yesterday.
Looks like $21 is possible as traders scurry to log in gains. Sellers should come in the high 30’s.
This one STINKS !
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       Last Friday I  projected levels where the following tech leaders would find support. After sharp declines, they rebounded from my projected lows.

Projected Lows (Friday, July 24 and Wednesday’s close)

Facebook (FB): Projected low: 223  – Actual Low: 226    Close: 230
Amazon (AMZN): Projected low:2,887 – Actual Low:2,888   Close : 3,000
Apple (AAPL): Projected low: 363 – Actual Low: 356     Close: 373
Netflix (NFLX): Projected low: 466  – Actual Low: 467    Close: 488
Google (GOOG): Projected low: 1,486 -Actual Low: 1,488   Close: 1,500
Tesla (TSLA): Projected low 1,407  – Actual Low 1,366    Close: 1,499
NOTE:
Netflix (NFLX: 488) looks lower now – 461 possible
Tesla (TSLA:1,499) can slip to 1,473
    These stocks must regain leadership in order to juice the rest of the stock market.  Weakness stands to trigger a sell-off in all stocks.
That leadership would be confirmed by moves across: Facebook
(241),
Amazon (3,190), Apple ( 387), Netflix (526), Google (1,570) , Tesla (1,606), which at this  point would be a stretch.
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Downside risk is: Facebook (FB-217), Amazon (AMZN – 2,757), Apple (AAPL – 348), Netflix (NFLX – 461), Google (GOOG – 1,440), Tesla  (TSLA – 1,310).
The direction of these tech dynamos is key to the direction of the market as a whole. Together they account for 20% of the price action of the S&P 500.
Bottom Line:
Tempted to go all in, the Robinhood investors are already there, piling into KODK as it runs into the stratosphere.  I wish them well, but chasing a stock that risen twofold, fourfold, fortyfold in two days and has little to go for it but government funding, is going to burn you more often than not.  Such speculation is classic late-bull market euphoria.  While it is nice to see some old-time speculative interest versus this “watching paint dry” institutional  meandering, risks rise with prices, especially stocks that have little basis for investment.  OK, if you can buy KODK and sell it to someone else at a higher price, fine. However, eventually, someone will be left holding the bag as the stock vanishes.
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Wednesday  July 29, 2020  (DJIA: 26,379) “FAANG Stocks Need to Rebound….Or It Is Trouble”

.     It is hard  to explain the huge disconnect between the buoyant stock market and the economy  which is in recession and the ravages of COVID-19 which has infected 4.3 million and terrified everyone else.
Obviously, the Street is looking beyond the problem to a time when the economy rises out of recession and current stock prices are justified.
I don’t see it that way.  For one, COVID is crushing economies in our country and around the world.  Its impact stands to be long-lasting, even within  new treatments and  vaccines.
Then too, the S&P 500 was extremely overvalued before COVID and more so now with corporate earnings plummeting.  Additionally, we are faced with uncertainty about the result of the election in November and its impact on the economy, companies and lives.
Wall Street is betting that all is well – Don’t you !
The FAANG stocks listed below are looked upon as market leaders and for good reason, they have been hot when everything else is lukewarm.
Two weeks ago, they topped out with a dramatic one-day reversal closing at the lows for the day and trending down ever since. My blog next day (July 14), headlined, “Wall Street’s Darlings De-Fanged.”
Last Friday I  projected levels where the following tech leaders would find support. After sharp declines, they rebounded from my projected lows.

Projected Lows (Friday, July 24)

Facebook (FB): Projected low: 223  – Actual Low: 226    Close: 230
Amazon (AMZN): Projected low:2,887 – Actual Low:2,888   Close : 3,000
Apple (AAPL): Projected low: 363 – Actual Low: 356     Close: 373
Netflix (NFLX): Projected low: 466  – Actual Low: 467    Close: 488
Google (GOOG): Projected low: 1,486 -Actual Low: 1,488   Close: 1,500
Tesla (TSLA): Projected low 1,407  – Actual Low 1,366    Close: 1,476
…………………………………………………………………………………………
Facebook (FB), Amazon (AMZN), Apple (AAPL) and Google (GOOG) will report earnings Thursday.  Netflix (NFLX) and Tesla (TSLA) have already reported.
It is anyone’s guess how the Street will react to these reports.  If a company doesn’t “beat” by enough, its stock can tumble. Generally, the Street projects a bit on the low-end.
The rebound of these  stocks must be watched  closely and especially the reaction of those companies reporting this week.
These leaders must exceed the following prices in order to re-establish their leadership.  Falling short, suggests weakness which could spill over to the market as a whole.
Resistance That Must Be Overcome:
Facebook (241)
Amazon (3,190)
Apple ( 387)
Netflix (526)
Google (1,570)
Tesla (1,606).
………………………………………………………..
Downside risk from  here:
Facebook
(FB)   Tuesday close ( 230)    Risk (217)
Amazon (AMZN) Tuesday close: 3000   Risk (2757)
Apple (AAPL) Tuesday ☹373)   Risk (348)
Netflix (NFLX) Tuesday Close (488)    Risk (461)
Google (GOOG) Tuesday Close (1,500)   Risk (1,440)
Tesla  (TSLA)   Tuesday Close:  1,476   Risk (1,310)
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Bottom Line:
At some point, the stock market must adjust for adversity and uncertainty.
Technically, it is as if the market has crawled far out on a limb which will snap at some point, leading to another flash crash.
The swing factor will be the realization that a “V” recovery is not in the cards, that it will be more like an “L.,” which I have been saying for many months.
Fed Chief Powell has centerstage at 2:30 today, with no surprises. The orchestrater of Bubble #1 (December 2018 – February 2020), Powell has appeared to me to be an enabler of Republicans holding on to Senate control, even re-electing President Trump, so anything can happen.
I just think buyers will be a “no show” some day, as money managers realize how deeply our economy has been impacted and how far into  the future the problems will persist.  That would result in another flash crash (new normal).
Currently, I see a flash crash impacting the market averages as follows.
DJIA 21,500,   S&P 500: 2,534,  Nasdaq Comp. 8,028.  With major plunges, the extent is determined by what new negatives impact  the downside momentum as stocks are tumbling, and especially at those junctures where the market is attempting to find support and rebound.

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Tuesday  July 28, 2020  (DJIA: 26,584) “I Was Wrong ! The Market’s Plunge Did Not Start July 27,  But It Is Coming – Flash Crash #2
Monday July 27, the day I said  the market would begin its plunge into the fall came and went with a rise in the market averages, not a plunge.
I am undeterred in my belief it will come.
      If I can take credit for anything, it was my pinpoint  of Friday’s correction lows on of the following.  After sharp declines in early trading, these tech leaders rebounded nicely from those lows  Friday and rose again yesterday.
Facebook (FB): Projected low: 223  – Actual Low: 226    Close: 233  today
Amazon (AMZN): Projected low:2,887 – Actual Low:2,888   Close : 3,055 today
Apple (AAPL): Projected low: 363 – Actual Low: 356     Close: 379 today
Netflix (NFLX): Projected low: 466  – Actual Low: 467    Close: 495 today
Google (GOOG): Projected low: 1,486 -Actual Low: 1,488   Close: 1,530 today
Tesla (TSLA): Projected low 1,407  – Actual Low 1,366    Close: 1,539 today

These have been the market leaders for  months, driving the Nasdaq Comp. to new all-time highs when the DJIA and S&P 500 did not.
But they  turned down after  dramatic one-day reversals two weeks ago.
This week we will get a big test of their leadership as  Q2 earnings get posted.
Facebook (FB) reports earnings on Wednesday; Amazon (AMZN), Apple (AAPL) and Google (GOOG) report Thursday.  Netflix (NFLX) and Tesla (TSLA) have already reported.
The rebound of these  stocks must be watched  closely and especially the reaction of the companies reporting this week.
These leaders must exceed the following prices in order to re-establish their leadership.  Falling short, suggests weakness which could spill over to the market as a whole.
Resistance That Must Be overcome:
Facebook (241), Amazon (3,190), Apple ( 387), Netflix (526), Google (1,570) Tesla (1,606).
Bottom Line:
It is just a matter of time  until a few BIG hitters walk away, worse yet sell in-size,  and it is LIGHTS OUT.  Everyone will scramble to find a buyer for their stock – Flash Crash #2  !
Here is what is hard to understand. Knowing the historic overvaluation of most stocks, the unpredictably of COVID-19, the political unrest in our country, and potential for a severe recession/depression, how money managers can justify buying at these levels without incurring legal blowback if the market crashes.
Rally failures would be a sign that the BIG money is selling.
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Recent headlines:
“Bear Market Rally Top Looms”  (July 9 )
Bubble Burst Looms !  COVID-19 Repeat”   (July 10)
One More Spike Before Fall Plunge”   (July 13)
“Wall Street’s Darlings De-Fanged”  (July14)
Vaccine – a Gamer Changer ?”   (July 15)
“Market Turns Down July 27”  (July 16)
One More Push Before a Crunch ?”   (July 20)
“Rally to Set Up Correction”   (July 21)
“At Some Point: Market to Open – No Buyers in Sight”   (July 22)
“Last Push Before Bubble Bursts (July 27 ??)  (July 23)
“FAANG Stocks Floundering”   (July 24)
“Risk Surging in Overvalued Market”  (July 27)
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Monday, July 27, 2020 (DJIA: 26,469) “Risk Surging in Overvalued Market”
     For months I have warned that a  correction into the fall would develop, and two weeks ago I said it would start on July 27 – today.
If I am wrong about the 27th,
 I erred by going with my “gut” about a specific day, NOT that a plunge into the fall won’t happen.  It will.
Friday, I called for a spike down in the FAANG stocks, picking the price level where I expected them to rebound from, which they did.
Facebook (FB): 223  – Low: 226    Close: 230
Amazon (AMZN): 2,887 – Low:2,888     Close: 3,008
Apple (AAPL):363 – Low: 356     Close: 370
Netflix (NFLX):466  – Low: 467      Close: 480
Google (GOOG):1,486  – Low: 1,488   Close: 1,511
Tesla (TSLA):1,407  –  Low 1,366    Close: 1,417
As noted Friday, the rebound of these stocks must be watched closely. Failure to bounce sharply would be a huge warning signal for the group and market as a whole.
Danger of Disconnect:
The Street’s disconnect with what has happened, is happening and an unpredictable future, has created a highly dangerous situation, unlike anything I have seen in 58 years in this business, 52 years as a writer.
Knowing the historic overvaluation of most stocks, the unpredictably of COVID-19, the political unrest in our country, and potential for a severe recession/depression, I question how money managers can justify buying at these levels without incurring legal blowback if the market crashes.
If just a few BIG hitters walk away, worse yet sell in-size, it is LIGHTS OUT.  Everyone will scramble to find a buyer for their stock – Flash Crash #2
Look, I am not a card-carrying bear, but we are tiptoeing through a minefield here with the market close to all-time highs.   There is no guarantee that we will get an “all’s well,” when COVID is under control.  Dominos will tumble for a long time.
       I think the Street’s algos have it wrong.   Unfortunately, this is what an 11-year old Fed-nurtured economic expansion and bull market will do for objective analysis.
Stuff happens.  Between 1968 and 1981 we had four recessions and six bear markets which included domestic, international  and political upheavals – comparable in many ways to today. . The Price/earnings ratio for the bluest of chips hit single digits !
What Can “Temporarily” Delay a Sell Off :
> Effective treatment and vaccine for COVID  -19 though many months away.
> Earnings that are reported as better than expected because the projections were low-balled in the first place.
> Expect hype by the Fed, Administration and Street, on the economy and especially on  a vaccine in effort to prop the market before November 3.
> Fed or Congressional stimulus. While helping individuals and institutions, the  dire need  for yet another program highlights the deepness of our problems.
Robinhood:
      Much is reported about how well the so-called Robinhood investors are doing. While dissed as newbies, novices, inexperienced, “oddlotters”, they are making money by “buying low, and selling high,” not in penny stocks, but tech stocks, airlines, stay-at-homes, breaking news stocks, etc..
Yesterday, Bloomberg quoted Bespoke Investment Group as noting how the newbie traders were buying the dip, not even afraid to jump on companies with serious financial problems.
One warning here for these gutsy traders who you can’t help but like. There will be a dip in the market that looks like a “gift”.   Instead, it will be the kiss of death for one’s trading portfolio …… if highly leveraged – worse.
That will be the dip before a flash crash that does not snap back quickly, a bear market, or depending on how one sees this one, the test of the March lows.
So far, it has paid off for these shooters to stretch a single into a double, but the risk of test of the March 23 lows looms.
What to do:  If it works, don’t change it, but don’t get greedy and….sit close to the exit.  Cash is an investment when risks are high. For one, it protects portfolio values in the event of a flash crash (new normal), two, it can be tapped if the market craters and gives investors a “dip”…. of 30% – 45%.
Bottom Line:
At these levels, price earnings that rank with the highest ever, the market does not discount current and future adversity, not even close.  These conditions breed another flash crash, if not today, in the near future.
Rallies must be watched for indications that they lack conviction.
Rally failures are deadly, as they reflect buyers are using strength to sell.
There will be a lot of hype and misinformation as the election approaches and it can trigger rallies – beware.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>                                                      
George Brooks
Investor’s first read.com
brooksie01@aol.com
A Game-On Analysis, LLC publication
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Investor’s first read, is a Game-On Analysis, LLC publication for which George Brooks is sole owner, manager and writer.  Neither Game-On Analysis, LLC, nor George  Brooks  is  registered as an investment advisor.  Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. References to specific securities should not be construed  as particularized or as investment advice as recommendations that you or any investors purchase or sell these securities on their own account. Readers are expected to assume full responsibility for conducting their own research pursuant to investment in keeping with their tolerance for risk.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock Market Up ?..Or Just a Few Tech Stocks ?

INVESTOR’S first read.com – Daily edge before the open
DJIA: 26,828
S&P 500: 3,306
Nasdaq Comp.:10,941
Russell:1,517
Wednesday August  5, 2020    8:48 a.m.
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brooksie01@aol.com
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November 15, 2019 (DJIA – 28,004)   I Called for a bear market to start in January, that the initial plunge would be 12%-18% – “straight down.” It started mid-February, dropped 16.3%, rallied then  plunged another 32.8%.
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January 20, 2020 (DJIA:29,348) My blog,  “INSANITY,” projected a bear market decline of  30% – 45%. The DJIA plunged 38.4% in 21 days.
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With the DJIA at 18,591on March 24, I wrote that , while I see lower prices later in the year, I expect a big rally with the upside potential of DJIA 22,037 (S&P 500 : 2,617) – it went higher.
With the DJIA at 23,942 (S&P 500) on April 15, I
called for  an end to  rally, up 29% but well short of how far the rally extended.  On May 18, I began to warn of  Bubble #2
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It’s all about how the market averages/Indexes are constructed, and especially what weightings are given in that construction.
The DJIA is “price weighted” where percentage changes in higher prices stocks like Apple (AAPL: 438)  nine times (9x) more weight than Cisco (CSCO:48).
This will change at the end of the month when Apple splits four-for-one, cutting its price down to generally to 109. United Healthcare (UNH: 304) will then be the highest priced stock in the DJIA.
The rest of the indexes are market value weighted (shares x price) giving the biggest companies more clout.
That leaves the ValueLine Composite which gives equal weight to each stock since it is an average of the percentage change in each of 1,675 stocks.  This is what is really happening to each stock.
The Nasdaq Comp. has mostly been driven by a handful of stocks (see below), which have powered the index 11.2% above the February highs.
The other indexes have yet to top the February  bull market highs prior to the 21-day, 35% plunge.
Why does it matter ?  Nasdaq’s surge past the February highs while all the other indexes are still below those highs gives a false impression of the market’s strength, gives a green light for investors to load up when, in the current case, that is a very dangerous thing to do.
Market Indexes Still Below February Highs
DJIA is down(- 9.3%)
S&P 500 (-2.3%)
Russell 2000 (-11.5%)
New York  Composite of 1,900 stocks (-11.1%)
Dow Jones Transportation Index (-11.2%)
ValueLine Composite of 1,675 stocks, an “unweighted” index giving equal weight to each stock (-17.2%)

Blomberg’s Barry Ritholtz’s  August 4, “Why Markets Don’t Seem to Care If the Economy Stinks” emphasizes why it matters.
He writes, “Most visible and economically vulnerable industries are also the smallest, based on market capitalization weight in major market indexes, such as the S&P 500.”  For added emphasis, he notes, the 30 most economically damaged industry categories could be de-listed…and it would hardly shave more than a few percentage points off the S&P 500.
Yet, look at the damage done to the stocks of these industries:
department stores (-62.6%), airlines (-55%), travel services (-51%), oil & gas equipment and services (-50%), resorts/casinos (-45%)hotel, real estate investment trusts (-42%).
Ritholtz says, these industries just don’t matter very  much to the stock market performance…the sectors that do matter are internet content, software infrastructure, consumer electronics and internet retailers account for $8 trillion in market value, close to 25% of the total U.S. stock market value of $35 trillion.
Take the 10 biggest technology companies in the S&P 500 and weight them equally and they would be up more than 37% for the year. Do the same for the other 490 companies in the index and they would be down 7.7%.
Leading TECH Stocks
I will use the following reference point to track leading tech stocks. These are the prices which I projected these stocks would spike down to in my Friday, July 24 post. They rebounded the following Monday marking a key turning point.
HOWEVER, as leaders, they could signal a downturn in a market that is by time-tested benchmarks, very over valued.  That’s why they must be watched with a reference point – the July 24 correction low.
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Projected Lows (Friday, July 24 and August 3 Close)

Facebook (FB): Projected low: 223  – Actual Low: 226    Close: 249
Amazon (AMZN): Projected low:2,887 – Actual Low:2,888   Close : 3,138
Apple (AAPL): Projected low: 363 – Actual Low: 356     Close: 438
Netflix (NFLX): Projected low: 466  – Actual Low: 467    Close: 509
Google (GOOG): Projected low: 1,486 -Actual Low: 1,488   Close: 1,464
Tesla (TSLA): Projected low 1,407  – Actual Low 1,366   Close: 1,464
I replaced Microsoft (MSFT) with Tesla (TSLA)
…………………………………………………….
Selected Technical observations:
(These are just chart reads (no fundamental input) -an observation that can change abruptly)
Apple (AAPL:435) Acts well  – my “400 possible” up from a 384 close Thursday
was  an understatement. Chart looked really good, should have been more aggressive.  Slip to 427 possible. No Change.
Google (GOOG: 1,474 ) Still digesting Friday’s flash crash. Spike to 1,499 possible. Beware one-day reversal.   As warned, GOOG spiked to 1,490, sold down to 1,465.
Break below 1,460 raises possibility of further drop to 1,421. Resistance 1,486.
Tesla (TSLA:1,485) Struggling after Friday crunch.  As I warned, it spiked to 1,509 then consolidated with Support 1,469, Resistance 1,497 Risk: 1,412.
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Eastman Kodak’s (KODK: 14.40) stock soared to $60 from $1.50 in two days as a result of the Trump administration’s $765 million loan to produce active pharmaceutical ingredients (API), most of which are currently produced abroad by China and India.
Suspicious to me was the jump to $10 from $1.50 Tuesday, July 24.
> After hitting $60 on Wednesday it closed at $33.20
> I started coverage on Thursday morning noting, “This One STINKS” and I said  it  looked like a $21 stock.
> Friday it closed at $21.85
> Monday morning,  August 3,  I warned of a spike down to $12.80, and  it closed at $14.95.
> Tuesday, I stuck to the $12.80 projection where I thought short sellers would cover and run it up to $19-$20. I believe they began to cover at the open yesterday with a high volume jump to $17.88 before slipping to my projected low $12.86, then closed at $14.40. Shorts may buy today bumping the stock up to $15.88.
Something seems very wrong here. I am covering it because there appears a need to better understand its market action. Unless there are currently  unknown fundamentals to justify strength, this stock could be headed much lower, perhaps below $7.
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RECENT POSTS:
Tuesday  August 4, 2020 (DJIA: 26,664) “Bubbles Burst !”

This is Bubble #2. It will burst on its own, or be pricked like Bubble #1 in February which led to  a 21-day, 35% drop in the stock market.
Currently, the Street is bullish because it is looking beyond the COVID crisis to a full recovery.
      I accept a rebound from depressed lows in Q1 and Q2, but beyond that, why would there be enough economic growth to support an overvaluation  of stocks not ever seen except perhaps the dot-com bubble in 2000 ?
In Q4 of 2018, the S&P 500 was down 20% reflecting a 10-year old economy that was on the threshold of recession.  The Fed stepped in with QE type support and cuts in its benchmark federal funds interest rate and postponed the recession.
Why would  the economy expand now after so much internal damage has been done to the economy and consumer confidence by COVID-19 and measures to contain it ?
The Street is in denial or at least until November 4. The Fed has been an enabler to stock prices for at least 18 months and will continue to be at least until November 4 with its policy of “doing all it takes.”
On a given day, managers of equity portfolios, fully aware of the damage done to our economy, the overvaluation of stocks, the uncertainty of the intermediate-and long-term future, and their fiduciary responsibility to clients will stop buying and even sell – flash crash #2 – and it won’t be pretty, because it will be based on fundamentals.

 

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Bottom Line:
Bubbles can expand more and more as rising prices attract more and more buyers. They can only expand so far until they burst on their own, or are pricked like Bubble #1 in February.
This is Bubble #2, which can burst at any time.  Realistically, that can happen when buyers simply don’t show up, money managers who fearful of legal action for reckless investing with so many known negatives and so many unknowns. Stop buying, even lock in profits.
What to do:  Have enough cash reserve in line with your tolerance for risk. Yes, I know resisting going all-in is difficult, we are just humans with human flaws – greed and fear.  I am not alone here, I read  a lot of analyses, bull and  bear, most of it very impressive for detail and logic.  The bears have it by a long shot.
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Monday August 3, 2020 DJIA (26,428) “Grandest Blow Off Of All-Time”
No one wants to hear reason at market tops ……and bottoms, but here goes anyhow.
Baupost Group’s Seth Klarman is also a critic of the Fed’s nurturing of the stock market, as reported by Market Watch’s Shawn Langlois over the weekend.
In an effort to explain the disconnect between stock prices and reality,   Klarman faulted the Fed with treating  the Street  like foolish children, unable to rationally set security prices without intervening .  When the market has a tantrum, the benevolent Fed has a soothing yet enabling response, he said.
I have criticized the Fed for years but in particular ever since January 2019 when I believe it very subtly manipulated the stock market upward with claims the economy was in a good place (when it wasn’t ?) after it was teetering on the edge of a recession in Q4 with the S&P 500 down 20%.
Politics ?  Over zealous ?  Don’t know, but the Fed  owned Bubble #1 which COVID pricked in February, and yes, the market bounced back, but a 35% crunch hurt a lot of investors.  Now we are dealing with Bubble # 2 and the result will be the same.  I see a 30% – 45% flash crash, but expected it before now.
A healthy market is one where  stocks trade freely without outside manipulation.
I am not alone with my warnings.  A.Gary Shilling’s August 2020 “INSIGHT,”
noting that Treasurys have rallied in the past month, and if the earlier relationship holds, stocks are due for another spill. We foresee the recession extending into 2021, with the S&P 500 falling 30% to 40%.”
I have enormous respect for Gary and his editor  Fred T. Rossi.
………………………………………………………………………………..

Last Friday I  projected levels where the following tech leaders would find Technology stocks have recouped the leadership role that has powered the recovery from the February/March flash crash lows.
Where to from here ?   After sharp declines, they rebounded from my projected lows. It is from these key lows, that we will get a continuing read on how well this group maintains its leadership.

Projected Lows (Friday, July 24 and July 31 Close)

Facebook (FB): Projected low: 223  – Actual Low: 226    Close: 253
Amazon (AMZN): Projected low:2,887 – Actual Low:2,888   Close : 3,164
Apple (AAPL): Projected low: 363 – Actual Low: 356     Close: 425
Netflix (NFLX): Projected low: 466  – Actual Low: 467    Close: 488
Google (GOOG): Projected low: 1,486 -Actual Low: 1,488   Close: 1,482
Tesla (TSLA): Projected low 1,407  – Actual Low 1,366    Close: 1,430
I replaced Microsoft (MSFT) with Tesla (TSLA)
…………………………………………………….
Selected Technical observations:
(These are just chart reads (no fundamental input) -an observation that can change abruptly)
Apple (AAPL:425) Acts well  – my “400 possible” up from a 384 close Thursday
was  an understatement. Chart looked really good, should have been more aggressive.  Support now: 417, Resistance starts 439.
Google (GOOG: 1,482 ) digesting Friday’s flash crash. Spike to 1,499 possible. Beware one-day reversal.
Tesla (TSLA:1,430) Struggling after Friday crunch. Needs base. Beware of spike followed by reversal. Highly news sensitive
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>.
      Eastman Kodak’s (KODK) stock soared to $60 from $1.50 in two days as a result of the Trump administration’s $765 million loan to produce active pharmaceutical ingredients (API), most of which are currently produced abroad by China and India.
I am wary of the price action of this stock, concerned that certain investors may have become aware of the government loan in advance of the huge move in the stock.
I think it is a high risk stock, but will comment on its technical action since there is a lot of interest.
KODK (7/31: 21.85)
Lots of Red Bull fever here. Up 20-fold in three days, this is a story stock with very little story except it got a big loan to manufacture important pharmaceutical ingredients essential to the production of many drugs.
Technical (not fundamental) read. Dropped below my “must hold” level at 27.50 to reach my  “risk projection” of  19.75 – 21.00. No telling what “they” can do with this one.   Spike down to 12.80 possible if panic sets in on break below 20.
It’s hard to tell if this is designed to be pumped up or dumped.
……………………………………………………………..
Bottom Line:
Just be aware that at some point this party will be over with the risk of a 30% – 45% crunch.  Bubble #2 –   Who has a pin ?
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Friday Jul 31, 2020 (DJIA: 36,313) “Fang Stocks Ready to Lead Again ?”

Q2 GDP declined 9.5% y/y or at a 32.9% annual rate, ugly, but not a su               Last Friday I  projected levels where the following tech leaders would find support. After sharp declines, they rebounded from my projected lows.

Projected Lows (Friday, July 24 and Wednesday’s close)

Facebook (FB): Projected low: 223  – Actual Low: 226    Close: 253
Amazon (AMZN): Projected low:2,887 – Actual Low:2,888   Close : 3,164
Apple (AAPL): Projected low: 363 – Actual Low: 356     Close: 425
Netflix (NFLX): Projected low: 466  – Actual Low: 467    Close: 488
Google (GOOG): Projected low: 1,486 -Actual Low: 1,488   Close: 1,482
Tesla (TSLA): Projected low 1,407  – Actual Low 1,366    Close: 1,430
I replaced Microsoft (MSFT) with Tesla (TSLA)
…………………………………………………….
Technical observations:
Apple
(AAPL:425) Acts well, technically – my “400 possible” up from a 384 close
was  an understatement. Chart looked really good, should have been more aggressive.  Support now: 417, Resistance starts 439.
Google (GOOG: 1,482)New  support is 1,467
Netflix (NFLX: 488) Struggling between 479 and 493.
Tesla (TSLA:1,430) Backed off my resistance at 1519, broke my support
Downside is 1,397.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>.
      Eastman Kodak’s (KODK) stock soared to $60 from $1.50 in two days as a result of the Trump administration’s $765 million loan to produce active pharmaceutical ingredients (API), most of which are currently produced abroad by China and India.
I am wary of the price action of this stock, concerned that certain investors may have become aware of the government loan in advance of the huge move in the stock.
I think it is a high risk stock, but will comment on its technical action since there is a lot of interest.
KODK (7/31: 21.85)
Lots of Red Bull fever here. Up 20-fold in three days, this is a story stock with very little story except it got a big loan to manufacture important pharmaceutical ingredients essential to the production of many drugs.
Technical (not fundamental) read. Dropped below my “must hold” level at 27.50 to reach my  risk of  19.75 – 21.00.  I can see a spike down to 12.80.

rprise.  But that’s at an annual rate which assumes that rate will continue through four quarters, which it won’t.
Another 1.43 million Americans filed for unemployment benefits.
But in this environment, does anyone making big investment decisions know what to expect going forward ?   If not, how can they justify investment decisions for clients at levels of valuation  that have consistently turned the stock market down over 50 years  ?
No where else to put money ?   Try telling a client that after a 30% -50% plunge in their portfolio.
Can’t happen – the Fed won’t let it, Congress won’t let it, or at least until after the November 3 elections.
The stock market has been  a discounter of present and perceived economic and investment conditions forever until now.
Typically the stock market runs to extremes of overvaluation and undervaluation depending on a host of variables,  including– domestic, international, monetary, fundamental, and economic conditions, none the least being psychology – fear/greed.
Current valuation of stocks defies all the rules. Worse yet, it does so at historically high valuations, which leaves little room for upside and a ton of risk on the downside.
        I have focused on the popular tech stocks, aka FAANG stocks, this week primarily because they are down from their  July 14 highs and are struggling to regain their role as leaders.

 

Bottom Line:
     With the ugly GDP and unemployment report out of the way, the Street feels comfortable with buying aggressively.  The Congressional hearings of tech companies was a ho-hummer, and they are ready to assume leadership again.
The Street is looking beyond the massive hit  our economy is taking to a continuation of the economic recovery.
       If that doesn’t happen, the market will plunge to levels that discount new  projections.
I see extreme vulnerability here, don’t think the Street is aware of the tumbling domino effect that lies ahead.   Just one industry’s woes can affect multiple industries and small businesses that are tied to it.
What to do:

Sit close to the exits and maintain a cash reserve in line with one’s tolerance for risk. As humans, that is tough to do when others are going all-in, even leveraging their investments.
When this sucker cracks, it will be straight down, another flash c rash – the new normal for corrections.
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Thursday, July 30, 2020  DJIA: 26,539) “Kodak: Can it Pass the Smell Test ?”
      Did you ever wonder what would happen to the market if the Fed did not continually nudge it when it weakens ?
Ever wonder how we can survive a crisis after this one
after the Fed and U.S. government have blown it all on this one.
Perhaps it should be given some thought, because on November 4, it will be a new ball game.  Our economy must be in horrendous shape.  Clearly the Fed thinks so, and most of Congress…………and I, as well.
The Street is betting the effort by the Fed and Congress  will be successful, that the damage done by  the pandemic will pass and the economic expansion will be on the mend.
That would be a good bet if the S&P 500 were 30% lower. At current levels it does not discount any adversity.
If the Street is wrong, we are faced with a horrendous bear market as the market probes for a level that discounts future prospects.
So many new investors at these overvalued levels will get pummeled. It would take years to get back even.  At great risk are investors who will need to tap their portfolio for big ticket items like a house, education, medical expenses, or for older people who will need to access it for retirement.
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Eastman Kodak (KODK)
       Eastman Kodak’s stock soared to $60 from $1.50 two days as a result of the Trump administration’s $765 million loan to produce active pharmaceutical ingredients (API), most of which are currently produced abroad by China and India.
The loan, the first of its kind and sourced from Defense Production Act, is suspicious, since it could have been given to any number of drug companies that are already in the business.  The concept of producing these ingredients  here makes sense, since only 21% of the “essential ingredients”  for drugs are produced here.
More suspicious to me is the jump to $!0 from $1.50 at the open Tuesday followed by a surge to $60 in early trading Wednesday. Who knew about the contract in advance ?  Later in the day, Kodak’s stock settled back and closed at $33.20 yesterday.  Imagine paying $1.50 two days ago – imagine being the fool who paid $60 yesterday.
Looks like $21 is possible as traders scurry to log in gains. Sellers should come in the high 30’s.
This one STINKS !
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       Last Friday I  projected levels where the following tech leaders would find support. After sharp declines, they rebounded from my projected lows.

Projected Lows (Friday, July 24 and Wednesday’s close)

Facebook (FB): Projected low: 223  – Actual Low: 226    Close: 230
Amazon (AMZN): Projected low:2,887 – Actual Low:2,888   Close : 3,000
Apple (AAPL): Projected low: 363 – Actual Low: 356     Close: 373
Netflix (NFLX): Projected low: 466  – Actual Low: 467    Close: 488
Google (GOOG): Projected low: 1,486 -Actual Low: 1,488   Close: 1,500
Tesla (TSLA): Projected low 1,407  – Actual Low 1,366    Close: 1,499
NOTE:
Netflix (NFLX: 488) looks lower now – 461 possible
Tesla (TSLA:1,499) can slip to 1,473
    These stocks must regain leadership in order to juice the rest of the stock market.  Weakness stands to trigger a sell-off in all stocks.
That leadership would be confirmed by moves across: Facebook
(241),
Amazon (3,190), Apple ( 387), Netflix (526), Google (1,570) , Tesla (1,606), which at this  point would be a stretch.
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Downside risk is: Facebook (FB-217), Amazon (AMZN – 2,757), Apple (AAPL – 348), Netflix (NFLX – 461), Google (GOOG – 1,440), Tesla  (TSLA – 1,310).
The direction of these tech dynamos is key to the direction of the market as a whole. Together they account for 20% of the price action of the S&P 500.
Bottom Line:
Tempted to go all in, the Robinhood investors are already there, piling into KODK as it runs into the stratosphere.  I wish them well, but chasing a stock that risen twofold, fourfold, fortyfold in two days and has little to go for it but government funding, is going to burn you more often than not.  Such speculation is classic late-bull market euphoria.  While it is nice to see some old-time speculative interest versus this “watching paint dry” institutional  meandering, risks rise with prices, especially stocks that have little basis for investment.  OK, if you can buy KODK and sell it to someone else at a higher price, fine. However, eventually, someone will be left holding the bag as the stock vanishes.
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Wednesday  July 29, 2020  (DJIA: 26,379) “FAANG Stocks Need to Rebound….Or It Is Trouble”

.     It is hard  to explain the huge disconnect between the buoyant stock market and the economy  which is in recession and the ravages of COVID-19 which has infected 4.3 million and terrified everyone else.
Obviously, the Street is looking beyond the problem to a time when the economy rises out of recession and current stock prices are justified.
I don’t see it that way.  For one, COVID is crushing economies in our country and around the world.  Its impact stands to be long-lasting, even within  new treatments and  vaccines.
Then too, the S&P 500 was extremely overvalued before COVID and more so now with corporate earnings plummeting.  Additionally, we are faced with uncertainty about the result of the election in November and its impact on the economy, companies and lives.
Wall Street is betting that all is well – Don’t you !
The FAANG stocks listed below are looked upon as market leaders and for good reason, they have been hot when everything else is lukewarm.
Two weeks ago, they topped out with a dramatic one-day reversal closing at the lows for the day and trending down ever since. My blog next day (July 14), headlined, “Wall Street’s Darlings De-Fanged.”
Last Friday I  projected levels where the following tech leaders would find support. After sharp declines, they rebounded from my projected lows.

Projected Lows (Friday, July 24)

Facebook (FB): Projected low: 223  – Actual Low: 226    Close: 230
Amazon (AMZN): Projected low:2,887 – Actual Low:2,888   Close : 3,000
Apple (AAPL): Projected low: 363 – Actual Low: 356     Close: 373
Netflix (NFLX): Projected low: 466  – Actual Low: 467    Close: 488
Google (GOOG): Projected low: 1,486 -Actual Low: 1,488   Close: 1,500
Tesla (TSLA): Projected low 1,407  – Actual Low 1,366    Close: 1,476
…………………………………………………………………………………………
Facebook (FB), Amazon (AMZN), Apple (AAPL) and Google (GOOG) will report earnings Thursday.  Netflix (NFLX) and Tesla (TSLA) have already reported.
It is anyone’s guess how the Street will react to these reports.  If a company doesn’t “beat” by enough, its stock can tumble. Generally, the Street projects a bit on the low-end.
The rebound of these  stocks must be watched  closely and especially the reaction of those companies reporting this week.
These leaders must exceed the following prices in order to re-establish their leadership.  Falling short, suggests weakness which could spill over to the market as a whole.
Resistance That Must Be Overcome:
Facebook (241)
Amazon (3,190)
Apple ( 387)
Netflix (526)
Google (1,570)
Tesla (1,606).
………………………………………………………..
Downside risk from  here:
Facebook
(FB)   Tuesday close ( 230)    Risk (217)
Amazon (AMZN) Tuesday close: 3000   Risk (2757)
Apple (AAPL) Tuesday ☹373)   Risk (348)
Netflix (NFLX) Tuesday Close (488)    Risk (461)
Google (GOOG) Tuesday Close (1,500)   Risk (1,440)
Tesla  (TSLA)   Tuesday Close:  1,476   Risk (1,310)
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Bottom Line:
At some point, the stock market must adjust for adversity and uncertainty.
Technically, it is as if the market has crawled far out on a limb which will snap at some point, leading to another flash crash.
The swing factor will be the realization that a “V” recovery is not in the cards, that it will be more like an “L.,” which I have been saying for many months.
Fed Chief Powell has centerstage at 2:30 today, with no surprises. The orchestrater of Bubble #1 (December 2018 – February 2020), Powell has appeared to me to be an enabler of Republicans holding on to Senate control, even re-electing President Trump, so anything can happen.
I just think buyers will be a “no show” some day, as money managers realize how deeply our economy has been impacted and how far into  the future the problems will persist.  That would result in another flash crash (new normal).
Currently, I see a flash crash impacting the market averages as follows.
DJIA 21,500,   S&P 500: 2,534,  Nasdaq Comp. 8,028.  With major plunges, the extent is determined by what new negatives impact  the downside momentum as stocks are tumbling, and especially at those junctures where the market is attempting to find support and rebound.

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Tuesday  July 28, 2020  (DJIA: 26,584) “I Was Wrong ! The Market’s Plunge Did Not Start July 27,  But It Is Coming – Flash Crash #2
Monday July 27, the day I said  the market would begin its plunge into the fall came and went with a rise in the market averages, not a plunge.
I am undeterred in my belief it will come.
      If I can take credit for anything, it was my pinpoint  of Friday’s correction lows on of the following.  After sharp declines in early trading, these tech leaders rebounded nicely from those lows  Friday and rose again yesterday.
Facebook (FB): Projected low: 223  – Actual Low: 226    Close: 233  today
Amazon (AMZN): Projected low:2,887 – Actual Low:2,888   Close : 3,055 today
Apple (AAPL): Projected low: 363 – Actual Low: 356     Close: 379 today
Netflix (NFLX): Projected low: 466  – Actual Low: 467    Close: 495 today
Google (GOOG): Projected low: 1,486 -Actual Low: 1,488   Close: 1,530 today
Tesla (TSLA): Projected low 1,407  – Actual Low 1,366    Close: 1,539 today

These have been the market leaders for  months, driving the Nasdaq Comp. to new all-time highs when the DJIA and S&P 500 did not.
But they  turned down after  dramatic one-day reversals two weeks ago.
This week we will get a big test of their leadership as  Q2 earnings get posted.
Facebook (FB) reports earnings on Wednesday; Amazon (AMZN), Apple (AAPL) and Google (GOOG) report Thursday.  Netflix (NFLX) and Tesla (TSLA) have already reported.
The rebound of these  stocks must be watched  closely and especially the reaction of the companies reporting this week.
These leaders must exceed the following prices in order to re-establish their leadership.  Falling short, suggests weakness which could spill over to the market as a whole.
Resistance That Must Be overcome:
Facebook (241), Amazon (3,190), Apple ( 387), Netflix (526), Google (1,570) Tesla (1,606).
Bottom Line:
It is just a matter of time  until a few BIG hitters walk away, worse yet sell in-size,  and it is LIGHTS OUT.  Everyone will scramble to find a buyer for their stock – Flash Crash #2  !
Here is what is hard to understand. Knowing the historic overvaluation of most stocks, the unpredictably of COVID-19, the political unrest in our country, and potential for a severe recession/depression, how money managers can justify buying at these levels without incurring legal blowback if the market crashes.
Rally failures would be a sign that the BIG money is selling.
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Recent headlines:
“Bear Market Rally Top Looms”  (July 9 )
Bubble Burst Looms !  COVID-19 Repeat”   (July 10)
One More Spike Before Fall Plunge”   (July 13)
“Wall Street’s Darlings De-Fanged”  (July14)
Vaccine – a Gamer Changer ?”   (July 15)
“Market Turns Down July 27”  (July 16)
One More Push Before a Crunch ?”   (July 20)
“Rally to Set Up Correction”   (July 21)
“At Some Point: Market to Open – No Buyers in Sight”   (July 22)
“Last Push Before Bubble Bursts (July 27 ??)  (July 23)
“FAANG Stocks Floundering”   (July 24)
“Risk Surging in Overvalued Market”  (July 27)
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Monday, July 27, 2020 (DJIA: 26,469) “Risk Surging in Overvalued Market”
     For months I have warned that a  correction into the fall would develop, and two weeks ago I said it would start on July 27 – today.
If I am wrong about the 27th,
 I erred by going with my “gut” about a specific day, NOT that a plunge into the fall won’t happen.  It will.
Friday, I called for a spike down in the FAANG stocks, picking the price level where I expected them to rebound from, which they did.
Facebook (FB): 223  – Low: 226    Close: 230
Amazon (AMZN): 2,887 – Low:2,888     Close: 3,008
Apple (AAPL):363 – Low: 356     Close: 370
Netflix (NFLX):466  – Low: 467      Close: 480
Google (GOOG):1,486  – Low: 1,488   Close: 1,511
Tesla (TSLA):1,407  –  Low 1,366    Close: 1,417
As noted Friday, the rebound of these stocks must be watched closely. Failure to bounce sharply would be a huge warning signal for the group and market as a whole.
Danger of Disconnect:
The Street’s disconnect with what has happened, is happening and an unpredictable future, has created a highly dangerous situation, unlike anything I have seen in 58 years in this business, 52 years as a writer.
Knowing the historic overvaluation of most stocks, the unpredictably of COVID-19, the political unrest in our country, and potential for a severe recession/depression, I question how money managers can justify buying at these levels without incurring legal blowback if the market crashes.
If just a few BIG hitters walk away, worse yet sell in-size, it is LIGHTS OUT.  Everyone will scramble to find a buyer for their stock – Flash Crash #2
Look, I am not a card-carrying bear, but we are tiptoeing through a minefield here with the market close to all-time highs.   There is no guarantee that we will get an “all’s well,” when COVID is under control.  Dominos will tumble for a long time.
       I think the Street’s algos have it wrong.   Unfortunately, this is what an 11-year old Fed-nurtured economic expansion and bull market will do for objective analysis.
Stuff happens.  Between 1968 and 1981 we had four recessions and six bear markets which included domestic, international  and political upheavals – comparable in many ways to today. . The Price/earnings ratio for the bluest of chips hit single digits !
What Can “Temporarily” Delay a Sell Off :
> Effective treatment and vaccine for COVID  -19 though many months away.
> Earnings that are reported as better than expected because the projections were low-balled in the first place.
> Expect hype by the Fed, Administration and Street, on the economy and especially on  a vaccine in effort to prop the market before November 3.
> Fed or Congressional stimulus. While helping individuals and institutions, the  dire need  for yet another program highlights the deepness of our problems.
Robinhood:
      Much is reported about how well the so-called Robinhood investors are doing. While dissed as newbies, novices, inexperienced, “oddlotters”, they are making money by “buying low, and selling high,” not in penny stocks, but tech stocks, airlines, stay-at-homes, breaking news stocks, etc..
Yesterday, Bloomberg quoted Bespoke Investment Group as noting how the newbie traders were buying the dip, not even afraid to jump on companies with serious financial problems.
One warning here for these gutsy traders who you can’t help but like. There will be a dip in the market that looks like a “gift”.   Instead, it will be the kiss of death for one’s trading portfolio …… if highly leveraged – worse.
That will be the dip before a flash crash that does not snap back quickly, a bear market, or depending on how one sees this one, the test of the March lows.
So far, it has paid off for these shooters to stretch a single into a double, but the risk of test of the March 23 lows looms.
What to do:  If it works, don’t change it, but don’t get greedy and….sit close to the exit.  Cash is an investment when risks are high. For one, it protects portfolio values in the event of a flash crash (new normal), two, it can be tapped if the market craters and gives investors a “dip”…. of 30% – 45%.
Bottom Line:
At these levels, price earnings that rank with the highest ever, the market does not discount current and future adversity, not even close.  These conditions breed another flash crash, if not today, in the near future.
Rallies must be watched for indications that they lack conviction.
Rally failures are deadly, as they reflect buyers are using strength to sell.
There will be a lot of hype and misinformation as the election approaches and it can trigger rallies – beware.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>                                                      
George Brooks
Investor’s first read.com
brooksie01@aol.com
A Game-On Analysis, LLC publication
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Investor’s first read, is a Game-On Analysis, LLC publication for which George Brooks is sole owner, manager and writer.  Neither Game-On Analysis, LLC, nor George  Brooks  is  registered as an investment advisor.  Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. References to specific securities should not be construed  as particularized or as investment advice as recommendations that you or any investors purchase or sell these securities on their own account. Readers are expected to assume full responsibility for conducting their own research pursuant to investment in keeping with their tolerance for risk.

 

 

 

 

 

 

 

 

 

 

 

 

 

Bubbles Burst !

INVESTOR’S first read.com – Daily edge before the open
DJIA: 26,664
S&P 500: 3,294
Nasdaq Comp.:10,902
Russell:1,526
Tuesday August  4, 2020    8:48 a.m.
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brooksie01@aol.com
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November 15, 2019 (DJIA – 28,004)   I Called for a bear market to start in January, that the initial plunge would be 12%-18% – “straight down.” It started mid-February, dropped 16.3%, rallied then  plunged another 32.8%.
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January 20, 2020 (DJIA:29,348) My blog,  “INSANITY,” projected a bear market decline of  30% – 45%. The DJIA plunged 38.4% in 21 days.
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With the DJIA at 18,591on March 24, I wrote that , while I see lower prices later in the year, I expect a big rally with the upside potential of DJIA 22,037 (S&P 500 : 2,617) – it went higher.
With the DJIA at 23,942 (S&P 500) on April 15, I
called for  an end to  rally, up 29% but well short of how far the rally extended.  On May 18, I began to warn of  Bubble #2
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Brief bio: In investment business 58 years, writing about stock market  for 52 years, including  investment publishers, brokers, research firms, investment bankers, plus my own investment advisories,  mostly as independent contractor to maintain independence of analysis.  “In the trenches” for every bear/bull market  since 1962. Started before  quote machines  as a tape reader/trader, posting charts by hand. Primarily  a technical analyst, but research includes fundamental, monetary, economic, psychological factors. Research recommendations/profiles of hundreds small companies.
Love rough and tumble… telling the story. CNBC-TV, Been writing investors first read.com daily before the open for 11 years.
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     This is Bubble #2. It will burst on its own, or be pricked like Bubble #1 in February leading to a 21-day, 35% drop in the stock market.
Currently, the Street is bullish because it is looking beyond the COVID crisis to a full recovery.
      I accept a rebound from depressed lows in Q1 and Q2, but beyond that, why would there be enough economic growth to support an overvaluation  of stocks not ever seen except perhaps the dot-com bubble in 2000 ?
In Q4 of 2018, the S&P 500 was down 20% reflecting a 10-year old economy that was on the threshold of recession.  The Fed stepped in with QE type support and cuts in its benchmark federal funds interest rate and postponed the recession.
Why would  the economy expand now after so much internal damage has been done to the economy and consumer confidence by COVID-19 and measures to contain it ?
The Street is in denial or at least until November 4. The Fed has been an enabler to stock prices for at least 18 months and will continue to be at least until November 4 with its policy of “doing all it takes.”
On a given day, managers of equity portfolios, fully aware of the damage done to our economy, the overvaluation of stocks, the uncertainty of the intermediate-and long-term future, and their fiduciary responsibility to clients will stop buying and even sell – flash crash #2 – and it won’t be pretty, because it will be based on fundamentals.
Leading TECH Stocks
I will use the following reference point to track leading tech stocks. These are the prices which I projected these stocks would spike down to in my Friday, July 24 post. They rebounded the following Monday marking a key turning point.
HOWEVER, as leaders, they could signal a downturn in a market that is by time-tested benchmarks, very over valued.  That’s why they must be watched with a reference point – the July 24 correction low.
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Projected Lows (Friday, July 24 and August 3 Close)

Facebook (FB): Projected low: 223  – Actual Low: 226    Close: 252
Amazon (AMZN): Projected low:2,887 – Actual Low:2,888   Close : 3,112
Apple (AAPL): Projected low: 363 – Actual Low: 356     Close: 435
Netflix (NFLX): Projected low: 466  – Actual Low: 467    Close: 498
Google (GOOG): Projected low: 1,486 -Actual Low: 1,488   Close: 1,474
Tesla (TSLA): Projected low 1,407  – Actual Low 1,366   Close: 1,415
I replaced Microsoft (MSFT) with Tesla (TSLA)
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Selected Technical observations:
(These are just chart reads (no fundamental input) -an observation that can change abruptly)
Apple (AAPL:435) Acts well  – my “400 possible” up from a 384 close Thursday
was  an understatement. Chart looked really good, should have been more aggressive.  Slip to 427 possible.
Google (GOOG: 1,474 ) Still digesting Friday’s flash crash. Spike to 1,499 possible. Beware one-day reversal.   As warned, GOOG spiked to 1,490, sold down to 1,465. Resistance is now 1,487. Support at 1,454 must hold, or it trades down to1,427
Tesla (TSLA:1,485) Struggling after Friday crunch.  As I warned, it spiked to 1,509 then consolidated with Support 1,469, Resistance 1,497 Risk: 1,412.
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Eastman Kodak’s (KODK: 14.95) stock soared to $60 from $1.50 in two days as a result of the Trump administration’s $765 million loan to produce active pharmaceutical ingredients (API), most of which are currently produced abroad by China and India.
Suspicious to me was the jump to $10 from $1.50 Tuesday, July 24.
> After hitting $60 on Wednesday it closed at $33.20
> I started coverage on Thursday morning noting, “This One STINKS” and I said  it  looked like a $21 stock.
> Friday it closed at $21.85
> Monday morning,  August 3,  I warned of a spike down to $12.80, and  it closed at $14.95.
> Today, I stick to the $12.80 projection where I think short sellers will cover and run it up to $19-$20, though buying at any level is risky.
Something seems very wrong here.
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Bottom Line:
Bubbles can expand more and more as rising prices attract more and more buyers. They can only expand so far until they burst on their own, or are pricked like Bubble #1 in February.
This is Bubble #2, which can burst at any time.  Realistically, that can happen when buyers simply don’t show up, money managers who fearful of legal action for reckless investing with so many known negatives and so many unknowns. Stop buying, even lock in profits.
What to do:  Have enough cash reserve in line with your tolerance for risk. Yes, I know resisting going all-in is difficult, we are just humans with human flaws – greed and fear.  I am not alone here, I read  a lot of analyses, bull and  bear, most of it very impressive for detail and logic.  The bears have it by a long shot.
 

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RECENT POSTS:
Monday August 3, 2020 DJIA(26,428) “Grandest Blow Off Of All-Time”
No one wants to hear reason at market tops ……and bottoms, but here goes anyhow.
Baupost Group’s Seth Klarman is also a critic of the Fed’s nurturing of the stock market, as reported by Market Watch’s Shawn Langlois over the weekend.
In an effort to explain the disconnect between stock prices and reality,   Klarman faulted the Fed with treating  the Street  like foolish children, unable to rationally set security prices without intervening .  When the market has a tantrum, the benevolent Fed has a soothing yet enabling response, he said.
I have criticized the Fed for years but in particular ever since January 2019 when I believe it very subtly manipulated the stock market upward with claims the economy was in a good place (when it wasn’t ?) after it was teetering on the edge of a recession in Q4 with the S&P 500 down 20%.
Politics ?  Over zealous ?  Don’t know, but the Fed  owned Bubble #1 which COVID pricked in February, and yes, the market bounced back, but a 35% crunch hurt a lot of investors.  Now we are dealing with Bubble # 2 and the result will be the same.  I see a 30% – 45% flash crash, but expected it before now.
A healthy market is one where  stocks trade freely without outside manipulation.
I am not alone with my warnings.  A.Gary Shilling’s August 2020 “INSIGHT,”
noting that Treasurys have rallied in the past month, and if the earlier relationship holds, stocks are due for another spill. We foresee the recession extending into 2021, with the S&P 500 falling 30% to 40%.”
I have enormous respect for Gary and his editor  Fred T. Rossi.
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Last Friday I  projected levels where the following tech leaders would find Technology stocks have recouped the leadership role that has powered the recovery from the February/March flash crash lows.
Where to from here ?   After sharp declines, they rebounded from my projected lows. It is from these key lows, that we will get a continuing read on how well this group maintains its leadership.

Projected Lows (Friday, July 24 and July 31 Close)

Facebook (FB): Projected low: 223  – Actual Low: 226    Close: 253
Amazon (AMZN): Projected low:2,887 – Actual Low:2,888   Close : 3,164
Apple (AAPL): Projected low: 363 – Actual Low: 356     Close: 425
Netflix (NFLX): Projected low: 466  – Actual Low: 467    Close: 488
Google (GOOG): Projected low: 1,486 -Actual Low: 1,488   Close: 1,482
Tesla (TSLA): Projected low 1,407  – Actual Low 1,366    Close: 1,430
I replaced Microsoft (MSFT) with Tesla (TSLA)
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Selected Technical observations:
(These are just chart reads (no fundamental input) -an observation that can change abruptly)
Apple (AAPL:425) Acts well  – my “400 possible” up from a 384 close Thursday
was  an understatement. Chart looked really good, should have been more aggressive.  Support now: 417, Resistance starts 439.
Google (GOOG: 1,482 ) digesting Friday’s flash crash. Spike to 1,499 possible. Beware one-day reversal.
Tesla (TSLA:1,430) Struggling after Friday crunch. Needs base. Beware of spike followed by reversal. Highly news sensitive
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>.
      Eastman Kodak’s (KODK) stock soared to $60 from $1.50 in two days as a result of the Trump administration’s $765 million loan to produce active pharmaceutical ingredients (API), most of which are currently produced abroad by China and India.
I am wary of the price action of this stock, concerned that certain investors may have become aware of the government loan in advance of the huge move in the stock.
I think it is a high risk stock, but will comment on its technical action since there is a lot of interest.
KODK (7/31: 21.85)
Lots of Red Bull fever here. Up 20-fold in three days, this is a story stock with very little story except it got a big loan to manufacture important pharmaceutical ingredients essential to the production of many drugs.
Technical (not fundamental) read. Dropped below my “must hold” level at 27.50 to reach my  “risk projection” of  19.75 – 21.00. No telling what “they” can do with this one.   Spike down to 12.80 possible if panic sets in on break below 20.
It’s hard to tell if this is designed to be pumped up or dumped.
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Bottom Line:
Just be aware that at some point this party will be over with the risk of a 30% – 45% crunch.  Bubble #2 –   Who has a pin ?
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Friday Jul 31, 2020 (DJIA: 36,313) “Fang Stocks Ready to Lead Again ?”

Q2 GDP declined 9.5% y/y or at a 32.9% annual rate, ugly, but not a su               Last Friday I  projected levels where the following tech leaders would find support. After sharp declines, they rebounded from my projected lows.

Projected Lows (Friday, July 24 and Wednesday’s close)

Facebook (FB): Projected low: 223  – Actual Low: 226    Close: 253
Amazon (AMZN): Projected low:2,887 – Actual Low:2,888   Close : 3,164
Apple (AAPL): Projected low: 363 – Actual Low: 356     Close: 425
Netflix (NFLX): Projected low: 466  – Actual Low: 467    Close: 488
Google (GOOG): Projected low: 1,486 -Actual Low: 1,488   Close: 1,482
Tesla (TSLA): Projected low 1,407  – Actual Low 1,366    Close: 1,430
I replaced Microsoft (MSFT) with Tesla (TSLA)
…………………………………………………….
Technical observations:
Apple
(AAPL:425) Acts well, technically – my “400 possible” up from a 384 close
was  an understatement. Chart looked really good, should have been more aggressive.  Support now: 417, Resistance starts 439.
Google (GOOG: 1,482)New  support is 1,467
Netflix (NFLX: 488) Struggling between 479 and 493.
Tesla (TSLA:1,430) Backed off my resistance at 1519, broke my support
Downside is 1,397.
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      Eastman Kodak’s (KODK) stock soared to $60 from $1.50 in two days as a result of the Trump administration’s $765 million loan to produce active pharmaceutical ingredients (API), most of which are currently produced abroad by China and India.
I am wary of the price action of this stock, concerned that certain investors may have become aware of the government loan in advance of the huge move in the stock.
I think it is a high risk stock, but will comment on its technical action since there is a lot of interest.
KODK (7/31: 21.85)
Lots of Red Bull fever here. Up 20-fold in three days, this is a story stock with very little story except it got a big loan to manufacture important pharmaceutical ingredients essential to the production of many drugs.
Technical (not fundamental) read. Dropped below my “must hold” level at 27.50 to reach my  risk of  19.75 – 21.00.  I can see a spike down to 12.80.

rprise.  But that’s at an annual rate which assumes that rate will continue through four quarters, which it won’t.
Another 1.43 million Americans filed for unemployment benefits.
But in this environment, does anyone making big investment decisions know what to expect going forward ?   If not, how can they justify investment decisions for clients at levels of valuation  that have consistently turned the stock market down over 50 years  ?
No where else to put money ?   Try telling a client that after a 30% -50% plunge in their portfolio.
Can’t happen – the Fed won’t let it, Congress won’t let it, or at least until after the November 3 elections.
The stock market has been  a discounter of present and perceived economic and investment conditions forever until now.
Typically the stock market runs to extremes of overvaluation and undervaluation depending on a host of variables,  including– domestic, international, monetary, fundamental, and economic conditions, none the least being psychology – fear/greed.
Current valuation of stocks defies all the rules. Worse yet, it does so at historically high valuations, which leaves little room for upside and a ton of risk on the downside.
        I have focused on the popular tech stocks, aka FAANG stocks, this week primarily because they are down from their  July 14 highs and are struggling to regain their role as leaders.

 

Bottom Line:
     With the ugly GDP and unemployment report out of the way, the Street feels comfortable with buying aggressively.  The Congressional hearings of tech companies was a ho-hummer, and they are ready to assume leadership again.
The Street is looking beyond the massive hit  our economy is taking to a continuation of the economic recovery.
       If that doesn’t happen, the market will plunge to levels that discount new  projections.
I see extreme vulnerability here, don’t think the Street is aware of the tumbling domino effect that lies ahead.   Just one industry’s woes can affect multiple industries and small businesses that are tied to it.
What to do:

Sit close to the exits and maintain a cash reserve in line with one’s tolerance for risk. As humans, that is tough to do when others are going all-in, even leveraging their investments.
When this sucker cracks, it will be straight down, another flash c rash – the new normal for corrections.
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Thursday, July 30, 2020  DJIA: 26,539) “Kodak: Can it Pass the Smell Test ?”
      Did you ever wonder what would happen to the market if the Fed did not continually nudge it when it weakens ?
Ever wonder how we can survive a crisis after this one
after the Fed and U.S. government have blown it all on this one.
Perhaps it should be given some thought, because on November 4, it will be a new ball game.  Our economy must be in horrendous shape.  Clearly the Fed thinks so, and most of Congress…………and I, as well.
The Street is betting the effort by the Fed and Congress  will be successful, that the damage done by  the pandemic will pass and the economic expansion will be on the mend.
That would be a good bet if the S&P 500 were 30% lower. At current levels it does not discount any adversity.
If the Street is wrong, we are faced with a horrendous bear market as the market probes for a level that discounts future prospects.
So many new investors at these overvalued levels will get pummeled. It would take years to get back even.  At great risk are investors who will need to tap their portfolio for big ticket items like a house, education, medical expenses, or for older people who will need to access it for retirement.
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Eastman Kodak (KODK)
       Eastman Kodak’s stock soared to $60 from $1.50 two days as a result of the Trump administration’s $765 million loan to produce active pharmaceutical ingredients (API), most of which are currently produced abroad by China and India.
The loan, the first of its kind and sourced from Defense Production Act, is suspicious, since it could have been given to any number of drug companies that are already in the business.  The concept of producing these ingredients  here makes sense, since only 21% of the “essential ingredients”  for drugs are produced here.
More suspicious to me is the jump to $!0 from $1.50 at the open Tuesday followed by a surge to $60 in early trading Wednesday. Who knew about the contract in advance ?  Later in the day, Kodak’s stock settled back and closed at $33.20 yesterday.  Imagine paying $1.50 two days ago – imagine being the fool who paid $60 yesterday.
Looks like $21 is possible as traders scurry to log in gains. Sellers should come in the high 30’s.
This one STINKS !
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       Last Friday I  projected levels where the following tech leaders would find support. After sharp declines, they rebounded from my projected lows.

Projected Lows (Friday, July 24 and Wednesday’s close)

Facebook (FB): Projected low: 223  – Actual Low: 226    Close: 230
Amazon (AMZN): Projected low:2,887 – Actual Low:2,888   Close : 3,000
Apple (AAPL): Projected low: 363 – Actual Low: 356     Close: 373
Netflix (NFLX): Projected low: 466  – Actual Low: 467    Close: 488
Google (GOOG): Projected low: 1,486 -Actual Low: 1,488   Close: 1,500
Tesla (TSLA): Projected low 1,407  – Actual Low 1,366    Close: 1,499
NOTE:
Netflix (NFLX: 488) looks lower now – 461 possible
Tesla (TSLA:1,499) can slip to 1,473
    These stocks must regain leadership in order to juice the rest of the stock market.  Weakness stands to trigger a sell-off in all stocks.
That leadership would be confirmed by moves across: Facebook
(241),
Amazon (3,190), Apple ( 387), Netflix (526), Google (1,570) , Tesla (1,606), which at this  point would be a stretch.
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Downside risk is: Facebook (FB-217), Amazon (AMZN – 2,757), Apple (AAPL – 348), Netflix (NFLX – 461), Google (GOOG – 1,440), Tesla  (TSLA – 1,310).
The direction of these tech dynamos is key to the direction of the market as a whole. Together they account for 20% of the price action of the S&P 500.
Bottom Line:
Tempted to go all in, the Robinhood investors are already there, piling into KODK as it runs into the stratosphere.  I wish them well, but chasing a stock that risen twofold, fourfold, fortyfold in two days and has little to go for it but government funding, is going to burn you more often than not.  Such speculation is classic late-bull market euphoria.  While it is nice to see some old-time speculative interest versus this “watching paint dry” institutional  meandering, risks rise with prices, especially stocks that have little basis for investment.  OK, if you can buy KODK and sell it to someone else at a higher price, fine. However, eventually, someone will be left holding the bag as the stock vanishes.
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Wednesday  July 29, 2020  (DJIA: 26,379) “FAANG Stocks Need to Rebound….Or It Is Trouble”

.     It is hard  to explain the huge disconnect between the buoyant stock market and the economy  which is in recession and the ravages of COVID-19 which has infected 4.3 million and terrified everyone else.
Obviously, the Street is looking beyond the problem to a time when the economy rises out of recession and current stock prices are justified.
I don’t see it that way.  For one, COVID is crushing economies in our country and around the world.  Its impact stands to be long-lasting, even within  new treatments and  vaccines.
Then too, the S&P 500 was extremely overvalued before COVID and more so now with corporate earnings plummeting.  Additionally, we are faced with uncertainty about the result of the election in November and its impact on the economy, companies and lives.
Wall Street is betting that all is well – Don’t you !
The FAANG stocks listed below are looked upon as market leaders and for good reason, they have been hot when everything else is lukewarm.
Two weeks ago, they topped out with a dramatic one-day reversal closing at the lows for the day and trending down ever since. My blog next day (July 14), headlined, “Wall Street’s Darlings De-Fanged.”
Last Friday I  projected levels where the following tech leaders would find support. After sharp declines, they rebounded from my projected lows.

Projected Lows (Friday, July 24)

Facebook (FB): Projected low: 223  – Actual Low: 226    Close: 230
Amazon (AMZN): Projected low:2,887 – Actual Low:2,888   Close : 3,000
Apple (AAPL): Projected low: 363 – Actual Low: 356     Close: 373
Netflix (NFLX): Projected low: 466  – Actual Low: 467    Close: 488
Google (GOOG): Projected low: 1,486 -Actual Low: 1,488   Close: 1,500
Tesla (TSLA): Projected low 1,407  – Actual Low 1,366    Close: 1,476
…………………………………………………………………………………………
Facebook (FB), Amazon (AMZN), Apple (AAPL) and Google (GOOG) will report earnings Thursday.  Netflix (NFLX) and Tesla (TSLA) have already reported.
It is anyone’s guess how the Street will react to these reports.  If a company doesn’t “beat” by enough, its stock can tumble. Generally, the Street projects a bit on the low-end.
The rebound of these  stocks must be watched  closely and especially the reaction of those companies reporting this week.
These leaders must exceed the following prices in order to re-establish their leadership.  Falling short, suggests weakness which could spill over to the market as a whole.
Resistance That Must Be Overcome:
Facebook (241)
Amazon (3,190)
Apple ( 387)
Netflix (526)
Google (1,570)
Tesla (1,606).
………………………………………………………..
Downside risk from  here:
Facebook
(FB)   Tuesday close ( 230)    Risk (217)
Amazon (AMZN) Tuesday close: 3000   Risk (2757)
Apple (AAPL) Tuesday ☹373)   Risk (348)
Netflix (NFLX) Tuesday Close (488)    Risk (461)
Google (GOOG) Tuesday Close (1,500)   Risk (1,440)
Tesla  (TSLA)   Tuesday Close:  1,476   Risk (1,310)
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Bottom Line:
At some point, the stock market must adjust for adversity and uncertainty.
Technically, it is as if the market has crawled far out on a limb which will snap at some point, leading to another flash crash.
The swing factor will be the realization that a “V” recovery is not in the cards, that it will be more like an “L.,” which I have been saying for many months.
Fed Chief Powell has centerstage at 2:30 today, with no surprises. The orchestrater of Bubble #1 (December 2018 – February 2020), Powell has appeared to me to be an enabler of Republicans holding on to Senate control, even re-electing President Trump, so anything can happen.
I just think buyers will be a “no show” some day, as money managers realize how deeply our economy has been impacted and how far into  the future the problems will persist.  That would result in another flash crash (new normal).
Currently, I see a flash crash impacting the market averages as follows.
DJIA 21,500,   S&P 500: 2,534,  Nasdaq Comp. 8,028.  With major plunges, the extent is determined by what new negatives impact  the downside momentum as stocks are tumbling, and especially at those junctures where the market is attempting to find support and rebound.

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Tuesday  July 28, 2020  (DJIA: 26,584) “I Was Wrong ! The Market’s Plunge Did Not Start July 27,  But It Is Coming – Flash Crash #2
Monday July 27, the day I said  the market would begin its plunge into the fall came and went with a rise in the market averages, not a plunge.
I am undeterred in my belief it will come.
      If I can take credit for anything, it was my pinpoint  of Friday’s correction lows on of the following.  After sharp declines in early trading, these tech leaders rebounded nicely from those lows  Friday and rose again yesterday.
Facebook (FB): Projected low: 223  – Actual Low: 226    Close: 233  today
Amazon (AMZN): Projected low:2,887 – Actual Low:2,888   Close : 3,055 today
Apple (AAPL): Projected low: 363 – Actual Low: 356     Close: 379 today
Netflix (NFLX): Projected low: 466  – Actual Low: 467    Close: 495 today
Google (GOOG): Projected low: 1,486 -Actual Low: 1,488   Close: 1,530 today
Tesla (TSLA): Projected low 1,407  – Actual Low 1,366    Close: 1,539 today

These have been the market leaders for  months, driving the Nasdaq Comp. to new all-time highs when the DJIA and S&P 500 did not.
But they  turned down after  dramatic one-day reversals two weeks ago.
This week we will get a big test of their leadership as  Q2 earnings get posted.
Facebook (FB) reports earnings on Wednesday; Amazon (AMZN), Apple (AAPL) and Google (GOOG) report Thursday.  Netflix (NFLX) and Tesla (TSLA) have already reported.
The rebound of these  stocks must be watched  closely and especially the reaction of the companies reporting this week.
These leaders must exceed the following prices in order to re-establish their leadership.  Falling short, suggests weakness which could spill over to the market as a whole.
Resistance That Must Be overcome:
Facebook (241), Amazon (3,190), Apple ( 387), Netflix (526), Google (1,570) Tesla (1,606).
Bottom Line:
It is just a matter of time  until a few BIG hitters walk away, worse yet sell in-size,  and it is LIGHTS OUT.  Everyone will scramble to find a buyer for their stock – Flash Crash #2  !
Here is what is hard to understand. Knowing the historic overvaluation of most stocks, the unpredictably of COVID-19, the political unrest in our country, and potential for a severe recession/depression, how money managers can justify buying at these levels without incurring legal blowback if the market crashes.
Rally failures would be a sign that the BIG money is selling.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Recent headlines:
“Bear Market Rally Top Looms”  (July 9 )
Bubble Burst Looms !  COVID-19 Repeat”   (July 10)
One More Spike Before Fall Plunge”   (July 13)
“Wall Street’s Darlings De-Fanged”  (July14)
Vaccine – a Gamer Changer ?”   (July 15)
“Market Turns Down July 27”  (July 16)
One More Push Before a Crunch ?”   (July 20)
“Rally to Set Up Correction”   (July 21)
“At Some Point: Market to Open – No Buyers in Sight”   (July 22)
“Last Push Before Bubble Bursts (July 27 ??)  (July 23)
“FAANG Stocks Floundering”   (July 24)
“Risk Surging in Overvalued Market”  (July 27)
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Monday, July 27, 2020 (DJIA: 26,469) “Risk Surging in Overvalued Market”
     For months I have warned that a  correction into the fall would develop, and two weeks ago I said it would start on July 27 – today.
If I am wrong about the 27th,
 I erred by going with my “gut” about a specific day, NOT that a plunge into the fall won’t happen.  It will.
Friday, I called for a spike down in the FAANG stocks, picking the price level where I expected them to rebound from, which they did.
Facebook (FB): 223  – Low: 226    Close: 230
Amazon (AMZN): 2,887 – Low:2,888     Close: 3,008
Apple (AAPL):363 – Low: 356     Close: 370
Netflix (NFLX):466  – Low: 467      Close: 480
Google (GOOG):1,486  – Low: 1,488   Close: 1,511
Tesla (TSLA):1,407  –  Low 1,366    Close: 1,417
As noted Friday, the rebound of these stocks must be watched closely. Failure to bounce sharply would be a huge warning signal for the group and market as a whole.
Danger of Disconnect:
The Street’s disconnect with what has happened, is happening and an unpredictable future, has created a highly dangerous situation, unlike anything I have seen in 58 years in this business, 52 years as a writer.
Knowing the historic overvaluation of most stocks, the unpredictably of COVID-19, the political unrest in our country, and potential for a severe recession/depression, I question how money managers can justify buying at these levels without incurring legal blowback if the market crashes.
If just a few BIG hitters walk away, worse yet sell in-size, it is LIGHTS OUT.  Everyone will scramble to find a buyer for their stock – Flash Crash #2
Look, I am not a card-carrying bear, but we are tiptoeing through a minefield here with the market close to all-time highs.   There is no guarantee that we will get an “all’s well,” when COVID is under control.  Dominos will tumble for a long time.
       I think the Street’s algos have it wrong.   Unfortunately, this is what an 11-year old Fed-nurtured economic expansion and bull market will do for objective analysis.
Stuff happens.  Between 1968 and 1981 we had four recessions and six bear markets which included domestic, international  and political upheavals – comparable in many ways to today. . The Price/earnings ratio for the bluest of chips hit single digits !
What Can “Temporarily” Delay a Sell Off :
> Effective treatment and vaccine for COVID  -19 though many months away.
> Earnings that are reported as better than expected because the projections were low-balled in the first place.
> Expect hype by the Fed, Administration and Street, on the economy and especially on  a vaccine in effort to prop the market before November 3.
> Fed or Congressional stimulus. While helping individuals and institutions, the  dire need  for yet another program highlights the deepness of our problems.
Robinhood:
      Much is reported about how well the so-called Robinhood investors are doing. While dissed as newbies, novices, inexperienced, “oddlotters”, they are making money by “buying low, and selling high,” not in penny stocks, but tech stocks, airlines, stay-at-homes, breaking news stocks, etc..
Yesterday, Bloomberg quoted Bespoke Investment Group as noting how the newbie traders were buying the dip, not even afraid to jump on companies with serious financial problems.
One warning here for these gutsy traders who you can’t help but like. There will be a dip in the market that looks like a “gift”.   Instead, it will be the kiss of death for one’s trading portfolio …… if highly leveraged – worse.
That will be the dip before a flash crash that does not snap back quickly, a bear market, or depending on how one sees this one, the test of the March lows.
So far, it has paid off for these shooters to stretch a single into a double, but the risk of test of the March 23 lows looms.
What to do:  If it works, don’t change it, but don’t get greedy and….sit close to the exit.  Cash is an investment when risks are high. For one, it protects portfolio values in the event of a flash crash (new normal), two, it can be tapped if the market craters and gives investors a “dip”…. of 30% – 45%.
Bottom Line:
At these levels, price earnings that rank with the highest ever, the market does not discount current and future adversity, not even close.  These conditions breed another flash crash, if not today, in the near future.
Rallies must be watched for indications that they lack conviction.
Rally failures are deadly, as they reflect buyers are using strength to sell.
There will be a lot of hype and misinformation as the election approaches and it can trigger rallies – beware.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>                                                      
George Brooks
Investor’s first read.com
brooksie01@aol.com
A Game-On Analysis, LLC publication
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Investor’s first read, is a Game-On Analysis, LLC publication for which George Brooks is sole owner, manager and writer.  Neither Game-On Analysis, LLC, nor George  Brooks  is  registered as an investment advisor.  Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. References to specific securities should not be construed  as particularized or as investment advice as recommendations that you or any investors purchase or sell these securities on their own account. Readers are expected to assume full responsibility for conducting their own research pursuant to investment in keeping with their tolerance for risk.

 

 

 

 

 

 

 

 

 

 

 

 

Grandest Blow Off Of All-Time

INVESTOR’S first read.com – Daily edge before the open
DJIA: 26,428
S&P 500: 3,271
Nasdaq Comp.:10,745
Russell:1,480
Monday August  3, 2020    9:03 a.m.
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brooksie01@aol.com
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November 15, 2019 (DJIA – 28,004)   I Called for a bear market to start in January, that the initial plunge would be 12%-18% – “straight down.” It started mid-February, dropped 16.3%, rallied then  plunged another 32.8%.
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January 20, 2020 (DJIA:29,348) My blog,  “INSANITY,” projected a bear market decline of  30% – 45%. The DJIA plunged 38.4% in 21 days.
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With the DJIA at 18,591on March 24, I wrote that , while I see lower prices later in the year, I expect a big rally with the upside potential of DJIA 22,037 (S&P 500 : 2,617) – it went higher.
With the DJIA at 23,942 (S&P 500) on April 15, I
called for  an end to  rally, up 29% but well short of how far the rally extended.  On May 18, I began to warn of  Bubble #2
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Brief bio: In investment business 58 years, writing about stock market  for 52 years, including  investment publishers, brokers, research firms, investment bankers, plus my own investment advisories,  mostly as independent contractor to maintain independence of analysis.  “In the trenches” for every bear/bull market  since 1962. Started before  quote machines  as a tape reader/trader, posting charts by hand. Primarily  a technical analyst, but research includes fundamental, monetary, economic, psychological factors. Research recommendations/profiles of hundreds small companies.
Love rough and tumble… telling the story. CNBC-TV, Been writing investors first read.com daily before the open for 11 years.
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         No one wants to hear reason at market tops ……and bottoms, but here goes anyhow.
Baupost Group’s Seth Klarman is also a critic of the Fed’s nurturing of the stock market, as reported by Market Watch’s Shawn Langlois over the weekend.
In an effort to explain the disconnect between stock prices and reality,   Klarman faulted the Fed with treating  the Street  like foolish children, unable to rationally set security prices without intervening .  When the market has a tantrum, the benevolent Fed has a soothing yet enabling response, he said.
I have criticized the Fed for years but in particular ever since January 2019 when I believe it very subtly manipulated the stock market upward with claims the economy was in a good place (when it wasn’t ?) after it was teetering on the edge of a recession in Q4 with the S&P 500 down 20%.
Politics ?  Over zealous ?  Don’t know, but the Fed  owned Bubble #1 which COVID pricked in February, and yes, the market bounced back, but a 35% crunch hurt a lot of investors.  Now we are dealing with Bubble # 2 and the result will be the same.  I see a 30% – 45% flash crash, but expected it before now.
A healthy market is one where  stocks trade freely without outside manipulation.
I am not alone with my warnings.  A.Gary Shilling’s August 2020 “INSIGHT,”
noting that Treasurys have rallied in the past month, and if the earlier relationship holds, stocks are due for another spill. We foresee the recession extending into 2021, with the S&P 500 falling 30% to 40%.”
I have enormous respect for Gary and his editor  Fred T. Rossi.
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Last Friday I  projected levels where the following tech leaders would find Technology stocks have recouped the leadership role that has powered the recovery from the February/March flash crash lows.
Where to from here ?   After sharp declines, they rebounded from my projected lows. It is from these key lows, that we will get a continuing read on how well this group maintains its leadership.

Projected Lows (Friday, July 24 and July 31 Close)

Facebook (FB): Projected low: 223  – Actual Low: 226    Close: 253
Amazon (AMZN): Projected low:2,887 – Actual Low:2,888   Close : 3,164
Apple (AAPL): Projected low: 363 – Actual Low: 356     Close: 425
Netflix (NFLX): Projected low: 466  – Actual Low: 467    Close: 488
Google (GOOG): Projected low: 1,486 -Actual Low: 1,488   Close: 1,482
Tesla (TSLA): Projected low 1,407  – Actual Low 1,366    Close: 1,430
I replaced Microsoft (MSFT) with Tesla (TSLA)
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Selected Technical observations:
(These are just chart reads (no fundamental input) -an observation that can change abruptly)
Apple (AAPL:425) Acts well  – my “400 possible” up from a 384 close Thursday
was  an understatement. Chart looked really good, should have been more aggressive.  Support now: 417, Resistance starts 439.
Google (GOOG: 1,482 ) digesting Friday’s flash crash. Spike to 1,499 possible. Beware one-day reversal.
Tesla (TSLA:1,430) Struggling after Friday crunch. Needs base. Beware of spike followed by reversal. Highly news sensitive
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      Eastman Kodak’s (KODK) stock soared to $60 from $1.50 in two days as a result of the Trump administration’s $765 million loan to produce active pharmaceutical ingredients (API), most of which are currently produced abroad by China and India.
I am wary of the price action of this stock, concerned that certain investors may have become aware of the government loan in advance of the huge move in the stock.
I think it is a high risk stock, but will comment on its technical action since there is a lot of interest.
KODK (7/31: 21.85)
Lots of Red Bull fever here. Up 20-fold in three days, this is a story stock with very little story except it got a big loan to manufacture important pharmaceutical ingredients essential to the production of many drugs.
Technical (not fundamental) read. Dropped below my “must hold” level at 27.50 to reach my  “risk projection” of  19.75 – 21.00. No telling what “they” can do with this one.   Spike down to 12.80 possible if panic sets in on break below 20.
It’s hard to tell if this is designed to be pumped up or dumped.
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Bottom Line:
Just be aware that at some point this party will be over with the risk of a 30% – 45% crunch.  Bubble #2 –   Who has a pin ?

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RECENT POSTS:
Friday Jul 31, 2020 (DJIA: 36,313) “Fang Stocks Ready to Lead Again ?”

Q2 GDP declined 9.5% y/y or at a 32.9% annual rate, ugly, but not a su               Last Friday I  projected levels where the following tech leaders would find support. After sharp declines, they rebounded from my projected lows.

Projected Lows (Friday, July 24 and Wednesday’s close)

Facebook (FB): Projected low: 223  – Actual Low: 226    Close: 253
Amazon (AMZN): Projected low:2,887 – Actual Low:2,888   Close : 3,164
Apple (AAPL): Projected low: 363 – Actual Low: 356     Close: 425
Netflix (NFLX): Projected low: 466  – Actual Low: 467    Close: 488
Google (GOOG): Projected low: 1,486 -Actual Low: 1,488   Close: 1,482
Tesla (TSLA): Projected low 1,407  – Actual Low 1,366    Close: 1,430
I replaced Microsoft (MSFT) with Tesla (TSLA)
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Technical observations:
Apple
(AAPL:425) Acts well, technically – my “400 possible” up from a 384 close
was  an understatement. Chart looked really good, should have been more aggressive.  Support now: 417, Resistance starts 439.
Google (GOOG: 1,482)New  support is 1,467
Netflix (NFLX: 488) Struggling between 479 and 493.
Tesla (TSLA:1,430) Backed off my resistance at 1519, broke my support
Downside is 1,397.
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      Eastman Kodak’s (KODK) stock soared to $60 from $1.50 in two days as a result of the Trump administration’s $765 million loan to produce active pharmaceutical ingredients (API), most of which are currently produced abroad by China and India.
I am wary of the price action of this stock, concerned that certain investors may have become aware of the government loan in advance of the huge move in the stock.
I think it is a high risk stock, but will comment on its technical action since there is a lot of interest.
KODK (7/31: 21.85)
Lots of Red Bull fever here. Up 20-fold in three days, this is a story stock with very little story except it got a big loan to manufacture important pharmaceutical ingredients essential to the production of many drugs.
Technical (not fundamental) read. Dropped below my “must hold” level at 27.50 to reach my  risk of  19.75 – 21.00.  I can see a spike down to 12.80.

rprise.  But that’s at an annual rate which assumes that rate will continue through four quarters, which it won’t.
Another 1.43 million Americans filed for unemployment benefits.
But in this environment, does anyone making big investment decisions know what to expect going forward ?   If not, how can they justify investment decisions for clients at levels of valuation  that have consistently turned the stock market down over 50 years  ?
No where else to put money ?   Try telling a client that after a 30% -50% plunge in their portfolio.
Can’t happen – the Fed won’t let it, Congress won’t let it, or at least until after the November 3 elections.
The stock market has been  a discounter of present and perceived economic and investment conditions forever until now.
Typically the stock market runs to extremes of overvaluation and undervaluation depending on a host of variables,  including– domestic, international, monetary, fundamental, and economic conditions, none the least being psychology – fear/greed.
Current valuation of stocks defies all the rules. Worse yet, it does so at historically high valuations, which leaves little room for upside and a ton of risk on the downside.
        I have focused on the popular tech stocks, aka FAANG stocks, this week primarily because they are down from their  July 14 highs and are struggling to regain their role as leaders.

 

Bottom Line:
     With the ugly GDP and unemployment report out of the way, the Street feels comfortable with buying aggressively.  The Congressional hearings of tech companies was a ho-hummer, and they are ready to assume leadership again.
The Street is looking beyond the massive hit  our economy is taking to a continuation of the economic recovery.
       If that doesn’t happen, the market will plunge to levels that discount new  projections.
I see extreme vulnerability here, don’t think the Street is aware of the tumbling domino effect that lies ahead.   Just one industry’s woes can affect multiple industries and small businesses that are tied to it.
What to do:

Sit close to the exits and maintain a cash reserve in line with one’s tolerance for risk. As humans, that is tough to do when others are going all-in, even leveraging their investments.
When this sucker cracks, it will be straight down, another flash c rash – the new normal for corrections.
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Thursday, July 30, 2020  DJIA: 26,539) “Kodak: Can it Pass the Smell Test ?”
      Did you ever wonder what would happen to the market if the Fed did not continually nudge it when it weakens ?
Ever wonder how we can survive a crisis after this one
after the Fed and U.S. government have blown it all on this one.
Perhaps it should be given some thought, because on November 4, it will be a new ball game.  Our economy must be in horrendous shape.  Clearly the Fed thinks so, and most of Congress…………and I, as well.
The Street is betting the effort by the Fed and Congress  will be successful, that the damage done by  the pandemic will pass and the economic expansion will be on the mend.
That would be a good bet if the S&P 500 were 30% lower. At current levels it does not discount any adversity.
If the Street is wrong, we are faced with a horrendous bear market as the market probes for a level that discounts future prospects.
So many new investors at these overvalued levels will get pummeled. It would take years to get back even.  At great risk are investors who will need to tap their portfolio for big ticket items like a house, education, medical expenses, or for older people who will need to access it for retirement.
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Eastman Kodak (KODK)
       Eastman Kodak’s stock soared to $60 from $1.50 two days as a result of the Trump administration’s $765 million loan to produce active pharmaceutical ingredients (API), most of which are currently produced abroad by China and India.
The loan, the first of its kind and sourced from Defense Production Act, is suspicious, since it could have been given to any number of drug companies that are already in the business.  The concept of producing these ingredients  here makes sense, since only 21% of the “essential ingredients”  for drugs are produced here.
More suspicious to me is the jump to $!0 from $1.50 at the open Tuesday followed by a surge to $60 in early trading Wednesday. Who knew about the contract in advance ?  Later in the day, Kodak’s stock settled back and closed at $33.20 yesterday.  Imagine paying $1.50 two days ago – imagine being the fool who paid $60 yesterday.
Looks like $21 is possible as traders scurry to log in gains. Sellers should come in the high 30’s.
This one STINKS !
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       Last Friday I  projected levels where the following tech leaders would find support. After sharp declines, they rebounded from my projected lows.

Projected Lows (Friday, July 24 and Wednesday’s close)

Facebook (FB): Projected low: 223  – Actual Low: 226    Close: 230
Amazon (AMZN): Projected low:2,887 – Actual Low:2,888   Close : 3,000
Apple (AAPL): Projected low: 363 – Actual Low: 356     Close: 373
Netflix (NFLX): Projected low: 466  – Actual Low: 467    Close: 488
Google (GOOG): Projected low: 1,486 -Actual Low: 1,488   Close: 1,500
Tesla (TSLA): Projected low 1,407  – Actual Low 1,366    Close: 1,499
NOTE:
Netflix (NFLX: 488) looks lower now – 461 possible
Tesla (TSLA:1,499) can slip to 1,473
    These stocks must regain leadership in order to juice the rest of the stock market.  Weakness stands to trigger a sell-off in all stocks.
That leadership would be confirmed by moves across: Facebook
(241),
Amazon (3,190), Apple ( 387), Netflix (526), Google (1,570) , Tesla (1,606), which at this  point would be a stretch.
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Downside risk is: Facebook (FB-217), Amazon (AMZN – 2,757), Apple (AAPL – 348), Netflix (NFLX – 461), Google (GOOG – 1,440), Tesla  (TSLA – 1,310).
The direction of these tech dynamos is key to the direction of the market as a whole. Together they account for 20% of the price action of the S&P 500.
Bottom Line:
Tempted to go all in, the Robinhood investors are already there, piling into KODK as it runs into the stratosphere.  I wish them well, but chasing a stock that risen twofold, fourfold, fortyfold in two days and has little to go for it but government funding, is going to burn you more often than not.  Such speculation is classic late-bull market euphoria.  While it is nice to see some old-time speculative interest versus this “watching paint dry” institutional  meandering, risks rise with prices, especially stocks that have little basis for investment.  OK, if you can buy KODK and sell it to someone else at a higher price, fine. However, eventually, someone will be left holding the bag as the stock vanishes.
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Wednesday  July 29, 2020  (DJIA: 26,379) “FAANG Stocks Need to Rebound….Or It Is Trouble”

.     It is hard  to explain the huge disconnect between the buoyant stock market and the economy  which is in recession and the ravages of COVID-19 which has infected 4.3 million and terrified everyone else.
Obviously, the Street is looking beyond the problem to a time when the economy rises out of recession and current stock prices are justified.
I don’t see it that way.  For one, COVID is crushing economies in our country and around the world.  Its impact stands to be long-lasting, even within  new treatments and  vaccines.
Then too, the S&P 500 was extremely overvalued before COVID and more so now with corporate earnings plummeting.  Additionally, we are faced with uncertainty about the result of the election in November and its impact on the economy, companies and lives.
Wall Street is betting that all is well – Don’t you !
The FAANG stocks listed below are looked upon as market leaders and for good reason, they have been hot when everything else is lukewarm.
Two weeks ago, they topped out with a dramatic one-day reversal closing at the lows for the day and trending down ever since. My blog next day (July 14), headlined, “Wall Street’s Darlings De-Fanged.”
Last Friday I  projected levels where the following tech leaders would find support. After sharp declines, they rebounded from my projected lows.

Projected Lows (Friday, July 24)

Facebook (FB): Projected low: 223  – Actual Low: 226    Close: 230
Amazon (AMZN): Projected low:2,887 – Actual Low:2,888   Close : 3,000
Apple (AAPL): Projected low: 363 – Actual Low: 356     Close: 373
Netflix (NFLX): Projected low: 466  – Actual Low: 467    Close: 488
Google (GOOG): Projected low: 1,486 -Actual Low: 1,488   Close: 1,500
Tesla (TSLA): Projected low 1,407  – Actual Low 1,366    Close: 1,476
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Facebook (FB), Amazon (AMZN), Apple (AAPL) and Google (GOOG) will report earnings Thursday.  Netflix (NFLX) and Tesla (TSLA) have already reported.
It is anyone’s guess how the Street will react to these reports.  If a company doesn’t “beat” by enough, its stock can tumble. Generally, the Street projects a bit on the low-end.
The rebound of these  stocks must be watched  closely and especially the reaction of those companies reporting this week.
These leaders must exceed the following prices in order to re-establish their leadership.  Falling short, suggests weakness which could spill over to the market as a whole.
Resistance That Must Be Overcome:
Facebook (241)
Amazon (3,190)
Apple ( 387)
Netflix (526)
Google (1,570)
Tesla (1,606).
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Downside risk from  here:
Facebook
(FB)   Tuesday close ( 230)    Risk (217)
Amazon (AMZN) Tuesday close: 3000   Risk (2757)
Apple (AAPL) Tuesday ☹373)   Risk (348)
Netflix (NFLX) Tuesday Close (488)    Risk (461)
Google (GOOG) Tuesday Close (1,500)   Risk (1,440)
Tesla  (TSLA)   Tuesday Close:  1,476   Risk (1,310)
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Bottom Line:
At some point, the stock market must adjust for adversity and uncertainty.
Technically, it is as if the market has crawled far out on a limb which will snap at some point, leading to another flash crash.
The swing factor will be the realization that a “V” recovery is not in the cards, that it will be more like an “L.,” which I have been saying for many months.
Fed Chief Powell has centerstage at 2:30 today, with no surprises. The orchestrater of Bubble #1 (December 2018 – February 2020), Powell has appeared to me to be an enabler of Republicans holding on to Senate control, even re-electing President Trump, so anything can happen.
I just think buyers will be a “no show” some day, as money managers realize how deeply our economy has been impacted and how far into  the future the problems will persist.  That would result in another flash crash (new normal).
Currently, I see a flash crash impacting the market averages as follows.
DJIA 21,500,   S&P 500: 2,534,  Nasdaq Comp. 8,028.  With major plunges, the extent is determined by what new negatives impact  the downside momentum as stocks are tumbling, and especially at those junctures where the market is attempting to find support and rebound.

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Tuesday  July 28, 2020  (DJIA: 26,584) “I Was Wrong ! The Market’s Plunge Did Not Start July 27,  But It Is Coming – Flash Crash #2
Monday July 27, the day I said  the market would begin its plunge into the fall came and went with a rise in the market averages, not a plunge.
I am undeterred in my belief it will come.
      If I can take credit for anything, it was my pinpoint  of Friday’s correction lows on of the following.  After sharp declines in early trading, these tech leaders rebounded nicely from those lows  Friday and rose again yesterday.
Facebook (FB): Projected low: 223  – Actual Low: 226    Close: 233  today
Amazon (AMZN): Projected low:2,887 – Actual Low:2,888   Close : 3,055 today
Apple (AAPL): Projected low: 363 – Actual Low: 356     Close: 379 today
Netflix (NFLX): Projected low: 466  – Actual Low: 467    Close: 495 today
Google (GOOG): Projected low: 1,486 -Actual Low: 1,488   Close: 1,530 today
Tesla (TSLA): Projected low 1,407  – Actual Low 1,366    Close: 1,539 today

These have been the market leaders for  months, driving the Nasdaq Comp. to new all-time highs when the DJIA and S&P 500 did not.
But they  turned down after  dramatic one-day reversals two weeks ago.
This week we will get a big test of their leadership as  Q2 earnings get posted.
Facebook (FB) reports earnings on Wednesday; Amazon (AMZN), Apple (AAPL) and Google (GOOG) report Thursday.  Netflix (NFLX) and Tesla (TSLA) have already reported.
The rebound of these  stocks must be watched  closely and especially the reaction of the companies reporting this week.
These leaders must exceed the following prices in order to re-establish their leadership.  Falling short, suggests weakness which could spill over to the market as a whole.
Resistance That Must Be overcome:
Facebook (241), Amazon (3,190), Apple ( 387), Netflix (526), Google (1,570) Tesla (1,606).
Bottom Line:
It is just a matter of time  until a few BIG hitters walk away, worse yet sell in-size,  and it is LIGHTS OUT.  Everyone will scramble to find a buyer for their stock – Flash Crash #2  !
Here is what is hard to understand. Knowing the historic overvaluation of most stocks, the unpredictably of COVID-19, the political unrest in our country, and potential for a severe recession/depression, how money managers can justify buying at these levels without incurring legal blowback if the market crashes.
Rally failures would be a sign that the BIG money is selling.
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Recent headlines:
“Bear Market Rally Top Looms”  (July 9 )
Bubble Burst Looms !  COVID-19 Repeat”   (July 10)
One More Spike Before Fall Plunge”   (July 13)
“Wall Street’s Darlings De-Fanged”  (July14)
Vaccine – a Gamer Changer ?”   (July 15)
“Market Turns Down July 27”  (July 16)
One More Push Before a Crunch ?”   (July 20)
“Rally to Set Up Correction”   (July 21)
“At Some Point: Market to Open – No Buyers in Sight”   (July 22)
“Last Push Before Bubble Bursts (July 27 ??)  (July 23)
“FAANG Stocks Floundering”   (July 24)
“Risk Surging in Overvalued Market”  (July 27)
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Monday, July 27, 2020 (DJIA: 26,469) “Risk Surging in Overvalued Market”
     For months I have warned that a  correction into the fall would develop, and two weeks ago I said it would start on July 27 – today.
If I am wrong about the 27th,
 I erred by going with my “gut” about a specific day, NOT that a plunge into the fall won’t happen.  It will.
Friday, I called for a spike down in the FAANG stocks, picking the price level where I expected them to rebound from, which they did.
Facebook (FB): 223  – Low: 226    Close: 230
Amazon (AMZN): 2,887 – Low:2,888     Close: 3,008
Apple (AAPL):363 – Low: 356     Close: 370
Netflix (NFLX):466  – Low: 467      Close: 480
Google (GOOG):1,486  – Low: 1,488   Close: 1,511
Tesla (TSLA):1,407  –  Low 1,366    Close: 1,417
As noted Friday, the rebound of these stocks must be watched closely. Failure to bounce sharply would be a huge warning signal for the group and market as a whole.
Danger of Disconnect:
The Street’s disconnect with what has happened, is happening and an unpredictable future, has created a highly dangerous situation, unlike anything I have seen in 58 years in this business, 52 years as a writer.
Knowing the historic overvaluation of most stocks, the unpredictably of COVID-19, the political unrest in our country, and potential for a severe recession/depression, I question how money managers can justify buying at these levels without incurring legal blowback if the market crashes.
If just a few BIG hitters walk away, worse yet sell in-size, it is LIGHTS OUT.  Everyone will scramble to find a buyer for their stock – Flash Crash #2
Look, I am not a card-carrying bear, but we are tiptoeing through a minefield here with the market close to all-time highs.   There is no guarantee that we will get an “all’s well,” when COVID is under control.  Dominos will tumble for a long time.
       I think the Street’s algos have it wrong.   Unfortunately, this is what an 11-year old Fed-nurtured economic expansion and bull market will do for objective analysis.
Stuff happens.  Between 1968 and 1981 we had four recessions and six bear markets which included domestic, international  and political upheavals – comparable in many ways to today. . The Price/earnings ratio for the bluest of chips hit single digits !
What Can “Temporarily” Delay a Sell Off :
> Effective treatment and vaccine for COVID  -19 though many months away.
> Earnings that are reported as better than expected because the projections were low-balled in the first place.
> Expect hype by the Fed, Administration and Street, on the economy and especially on  a vaccine in effort to prop the market before November 3.
> Fed or Congressional stimulus. While helping individuals and institutions, the  dire need  for yet another program highlights the deepness of our problems.
Robinhood:
      Much is reported about how well the so-called Robinhood investors are doing. While dissed as newbies, novices, inexperienced, “oddlotters”, they are making money by “buying low, and selling high,” not in penny stocks, but tech stocks, airlines, stay-at-homes, breaking news stocks, etc..
Yesterday, Bloomberg quoted Bespoke Investment Group as noting how the newbie traders were buying the dip, not even afraid to jump on companies with serious financial problems.
One warning here for these gutsy traders who you can’t help but like. There will be a dip in the market that looks like a “gift”.   Instead, it will be the kiss of death for one’s trading portfolio …… if highly leveraged – worse.
That will be the dip before a flash crash that does not snap back quickly, a bear market, or depending on how one sees this one, the test of the March lows.
So far, it has paid off for these shooters to stretch a single into a double, but the risk of test of the March 23 lows looms.
What to do:  If it works, don’t change it, but don’t get greedy and….sit close to the exit.  Cash is an investment when risks are high. For one, it protects portfolio values in the event of a flash crash (new normal), two, it can be tapped if the market craters and gives investors a “dip”…. of 30% – 45%.
Bottom Line:
At these levels, price earnings that rank with the highest ever, the market does not discount current and future adversity, not even close.  These conditions breed another flash crash, if not today, in the near future.
Rallies must be watched for indications that they lack conviction.
Rally failures are deadly, as they reflect buyers are using strength to sell.
There will be a lot of hype and misinformation as the election approaches and it can trigger rallies – beware.
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Friday  July 24, 2020 (DJIA: 26,652) “FAANG Stocks Floundering”
       On July 14, I headlined, “Wall Street’s Darlings De-Fanged” after the prior day’s   outsized one-day reversal with the close at the day’s low for  of all but one.   It signaled exhaustion for the FAANG stocks: Facebook (FB), Amazon (AMZN), Apple (AAPL), Netflix (NFLX), Microsoft (MSFT), Tesla (TSLA) which was confirmed yesterday when they plunged.
Look for a spike down in each followed by a rally which must be read closely. Buying must be aggressive, or it signals serious weakness. The Street has been quick to jump on any pullback to buy these stocks. Failure now indicates the group is in line for a major consolidation/correction.
Near-term support must hold:
Facebook (FB): 223
Amazon (AMZN): 2,887
Apple (AAPL):363
Netflix (NFLX):466
Google (GOOG):1,486
Microsoft (MSFT):
Tesla (TSLA):1,407
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Don’t believe our economy is in  dire straits ?
Walk around the block,
look to the right, look to the left.  Efficiency of getting anything done has ground to a halt. Communication sucks. The tempo of business muted.  Parents and consumers are afraid to go out. Stimulus money will be hoarded if not spent, who knows what to expect next ?  Dominos will be tumbling for a long time as the key interaction between businesses and consumers is disrupted.
Will the announcement of a treatment/vaccine help ?   Of course, but serious damage has been done to the economy and confidence  in institutions, employers and the government.
So why are stock prices more overvalued now than before COVID-19 struck ?
For one, the Street is looking beyond this crisis and economic woes to a recovery. For another, so many investment decisions are based on algorithms. It appears they aren’t programmed for an extended and severe recession/depression.
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Bottom Line:
    Two weeks ago, I picked July 27 as the day that the big correction into the fall would begin. Admittedly, news could delay that. A stimulus package would be a life-saver for some, but would be an admission that  the economy is in very serious shape.
But this bubble is due to burst.
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Thursday July 23, 2020 (DJIA: 27,005) “Last Push Before Flash Crash (July 27 ??)    The New York Weekly Economic Index (WEI) has stalled after a rebounding from depressed May/June levels, according to Axios Markets. The index covers daily and weekly consumer, labor and production  data and confirms bearish readings  compiled by Goldman Sachs, Jefferies and Oxford Economics..

Add to that, lower readings by the St. Louis Fed’s coincident employment and TSA checkpoint data and anyone paying attention has to be concerned that stock market valuations far greater than those in February before a 35% flash crash.

This doesn’t have to be complicated. This is Bubble #2, the first being a Fed-nurtured bubble between December 2018 and February 2020.

Bubbles expand until something pricks them or they burst on their own.
The S&P 500 was extremely overvalued in February before the COVID flash crash.
With corporate earnings down sharply and no assurance of a significant rebound in the future, the S&P 500 is so much more overvalued today.

Bottom Line:
       Flash crash #2 when the bubble bursts.  Expect Q2 earnings to be a better read than expected, but that is because they will be low-balled on the Street to create that effect.
The Fed, Administration and Street don’t want the party to end and will do all they can to prevent a sell off before November 3.
At some point, the market will open and there will be no buyers.
Why ? Because money managers will have difficulty justifying paying up for stocks, especially since they are well aware the future is bleak and uncertain. There is liability here.
Chief investment officer at UBS Ag, Mark Haefele, was quoted today by Bloomberg News saying, “As large asset allocators, when we look across, there are very few alternatives to equities right now.”

But at these levels, Cash is an alternative.

No,  cash doesn’t earn a return, but it protects portfolio values against losses and provides a reservoir to tap when the market is more reasonably priced.

      Risk of another flash crash is great enough to justify a cash reserve of 35% – 50%. or  more, depending on one’s tolerance for risk.
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Wednesday July 21, 2020 “At Some Point: Market to Open – No Buyers In Sight”
    For most of the Street’s tech Sweethearts, also referred to as the FAANG stocks, July 13’s one-day reversal signaled a near-term top. The following day, I headlined “Wall Street’s Darlings De-Fanged.”
    Why on earth would I take on the tech stocks, the “buy ‘em and don’t look back” stocks ?  No one else is.
That huge July 13 spike up with a close at the low for the day was a warning signal for Facebook (FB), Amazon (AMZN), Apple (AAPL), Netflix (NFLX), Microsoft (MSFT), Tesla (TSLA). So far, that spike was the “top” for all but  Google (GOOG), which had its one-day reversal yesterday.
The tech cult runs deep, everyone loves a sure thing….until reality sets in.
As if I wasn’t looking for trouble on that score, I have been calling for a major correction starting July 27, fully aware a lot of things can happen on  that day and the days to follow.
     Well, if I am  crazy enough to do this every day before the open for 11 years  (very few do),  I must step up to the plate and take my cuts  even if risking a “whiff.”
 If the market were down 30% or more, I could be more optimistic  knowing the market was discounting  a host of adversity and uncertainty from a historically overvalued level.
On July 13, I called for, “One More Spike Before a Fall Plunge.” Since then, the market has risen until yesterday.
At some point (July 27), the market will open with no buyers in sight and whoosh, down it goes, a decline that depending on what new negatives hit it when it tries to rally, could pass 35% as memories of the February/March flash crash surface.
This time, the rebound would take a lot longer.
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Tuesday July 21, 2020 (DJIA: 26,680) “Rally to Precede Correction”
Axios Markets’ Dion Rabouin claims Wall Street analysts are discussing the increasing possibility of a “blue wave” Democratic sweep of Congress and the presidency, that  Goldman Sachs, Societe General, State Street , TD Securities and UBS are preparing lists of Biden buys.
      I am not sure about that – a blue wave is not a certainty, says Ryan Detrick, senior strategist for LPL Financial.
Detrick notes that since 1928, the stock market has accurately predicted the winner of the presidential election 87% of the time when the S&P 500 was higher three months before the election, with the incumbent  party usually winning, when lower the  incumbents lost.
I am well aware investors tend to  vote their wallet. I also think the Fed, Administration (obviously) and Street are doing their best to prop the market up until November 3.
Bottom Line
If I am right about a major correction going into the November 3 election, the odds of winning favor the Democrats.
We are now getting the surge I referred to yesterday and on July 13 (“One More Spike Before Fall Plunge”). I expect it to carry through Friday with a decline starting Monday, July 27.
A lot  of good and bad can happen in this short interim to change that forecast.  I expect the $600/month to be extended over the weekend. That’s good for individuals but bad in that it would be an admission that the economy is in the very “deep stuff.”
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Monday July 20, 2020 (DJIA: 26,671) “One More Push Before a Crunch”
Last Thursday, I reminded readers that on July 6, I warned of a market sell off this month, but after one more spike up before the plunge.
I picked July 27 as the day for the beginning of the plunge which could add up to a decline of 30% – 45%, as memories of the February/March flash crash re-surface.
My reasoning is simple.  In February, the S&P 500 was historically more overvalued that at any time in the past except for the 2000 dot-com bubble.
We have so many more problems today than we had in February, why should the S&P 500 sell within 5% of February’s level ?
Aided by a half dozen monster tech stocks, the Nasdaq Comp. is in a world of its own, most of them beneficiaries of the COVID-19 shutdown.
At some point, I expect the stock market to begin discounting the damage done by COVID and measures undertaken to counter it.
I think that has to happen soon, that’s why I picked July 27, right in the middle of Q2 earnings season.
We live in an unreal world, anything can happen, investors should prepare for the worst and be glad if  less than that happens.
I expect one more push up before the big crunch. Two things are certain – uncertainty and the bizarre.
Bottom Line:
The market will attempt to nice jump up  today, as I have expected before the beginning of a sell off. Q 2 earnings will be ugly, but the Street has likely low-balled projections enough it can report “better-than-expected” results.  What a con-job !   What an unreal world.
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>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>                                                      
George Brooks
Investor’s first read.com
brooksie01@aol.com
A Game-On Analysis, LLC publication
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Investor’s first read, is a Game-On Analysis, LLC publication for which George Brooks is sole owner, manager and writer.  Neither Game-On Analysis, LLC, nor George  Brooks  is  registered as an investment advisor.  Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. References to specific securities should not be construed  as particularized or as investment advice as recommendations that you or any investors purchase or sell these securities on their own account. Readers are expected to assume full responsibility for conducting their own research pursuant to investment in keeping with their tolerance for risk.

 

 

 

 

 

 

 

 

 

 

 

FAANG Stocks Ready to Lead Again ?

INVESTOR’S first read.com – Daily edge before the open
DJIA: 26,313
S&P 500: 3,246
Nasdaq Comp.:10,587
Russell:1,495
Friday July 31, 2020    8:33 a.m.
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brooksie01@aol.com
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November 15, 2019 (DJIA – 28,004)   I Called for a bear market to start in January, that the initial plunge would be 12%-18% – “straight down.” It started mid-February, dropped 16.3%, rallied then  plunged another 32.8%.
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January 20, 2020 (DJIA:29,348) My blog,  “INSANITY,” projected a bear market decline of  30% – 45%. The DJIA plunged 38.4% in 21 days.
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With the DJIA at 18,591on March 24, I wrote that , while I see lower prices later in the year, I expect a big rally with the upside potential of DJIA 22,037 (S&P 500 : 2,617) – it went higher.
With the DJIA at 23,942 (S&P 500) on April 15, I
called for  an end to  rally, up 29% but well short of how far the rally extended.  On May 18, I began to warn of  Bubble #2
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Brief bio: In investment business 58 years, writing about stock market  for 52 years, including  investment publishers, brokers, research firms, investment bankers, plus my own investment advisories,  mostly as independent contractor to maintain independence of analysis.  “In the trenches” for every bear/bull market  since 1962. Started before  quote machines  as a tape reader/trader, posting charts by hand. Primarily  a technical analyst, but research includes fundamental, monetary, economic, psychological factors. Research recommendations/profiles of hundreds small companies.
Love rough and tumble… telling the story. CNBC-TV, Been writing investors first read.com daily before the open for 11 years. ………………………………………………………………..
Q2 GDP declined 9.5% y/y or at a 32.9% annual rate, ugly, but not a surprise.  But that’s at an annual rate which assumes that rate will continue through four quarters, which it won’t.
Another 1.43 million Americans filed for unemployment benefits.
But in this environment, does anyone making big investment decisions know what to expect going forward ?   If not, how can they justify investment decisions for clients at levels of valuation  that have consistently turned the stock market down over 50 years  ?
No where else to put money ?   Try telling a client that after a 30% -50% plunge in their portfolio.
Can’t happen – the Fed won’t let it, Congress won’t let it, or at least until after the November 3 elections.
The stock market has been  a discounter of present and perceived economic and investment conditions forever until now.
Typically the stock market runs to extremes of overvaluation and undervaluation depending on a host of variables,  including– domestic, international, monetary, fundamental, and economic conditions, none the least being psychology – fear/greed.
Current valuation of stocks defies all the rules. Worse yet, it does so at historically high valuations, which leaves little room for upside and a ton of risk on the downside.
        I have focused on the popular tech stocks, aka FAANG stocks, this week primarily because they are down from their  July 14 highs and are struggling to regain their role as leaders.
       Last Friday I  projected levels where the following tech leaders would find support. After sharp declines, they rebounded from my projected lows.

Projected Lows (Friday, July 24 and Wednesday’s close)

Facebook (FB): Projected low: 223  – Actual Low: 226    Close: 234
Amazon (AMZN): Projected low:2,887 – Actual Low:2,888   Close : 3,051
Apple (AAPL): Projected low: 363 – Actual Low: 356     Close: 384
Netflix (NFLX): Projected low: 466  – Actual Low: 467    Close: 486
Google (GOOG): Projected low: 1,486 -Actual Low: 1,488   Close: 1,531
Tesla (TSLA): Projected low 1,407  – Actual Low 1,366    Close: 1,487
I replaced Microsoft (MSFT) with Tesla (TSLA)
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Technical observations:
Apple
(AAPL:384) Acts well, technically – 400 possible near-term.
Google (GOOG: 1,531) Support is 1,517…. 1,561 possible
Netflix (NFLX: 485) looks lower now – 461 possible
Tesla (TSLA:1,487) At a technical crossroads. Upside potential is 1,519.
Downside is 1,473.
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      Eastman Kodak’s (KODK) stock soared to $60 from $1.50 in two days as a result of the Trump administration’s $765 million loan to produce active pharmaceutical ingredients (API), most of which are currently produced abroad by China and India.
I am wary of the price action of this stock, concerned that certain investors may have become aware of the government loan in advance of the huge move in the stock.
I think it is a high risk stock, but will comment on its technical action since there is a lot of interest.
KODK (7/31: 29.83) Day’s high: 44.44, Low: 27.50
Lots of Red Bull fever here. Up 20-fold in three days, this is a story stock with very little story except it got a big loan to manufacture important pharmaceutical ingredients essential to the production of many drugs.

Technical (not fundamental) read. The 27.50 price must hold or a drop to 19.75 – 21.00 is likely.  Risk is much greater since this stock sold at 1.50  four days ago. Traders can play with a situation like this since fundamentals cannot be quantified, a plus for stock manipulation.
Bottom Line:
     With the ugly GDP and unemployment report out of the way, the Street feels comfortable with buying aggressively.  The Congressional hearings of tech companies was a ho-hummer, and they are ready to assume leadership again.
The Street is looking beyond the massive hit  our economy is taking to a continuation of the economic recovery.
       If that doesn’t happen, the market will plunge to levels that discount new  projections.
I see extreme vulnerability here, don’t think the Street is aware of the tumbling domino effect that lies ahead.   Just one industry’s woes can affect multiple industries and small businesses that are tied to it.
What to do:

Sit close to the exits and maintain a cash reserve in line with one’s tolerance for risk. As humans, that is tough to do when others are going all-in, even leveraging their investments.
When this sucker cracks, it will be straight down, another flash c rash – the new normal for corrections.

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RECENT POSTS:
Thursday, July 30, 2020  DJIA: 26,539) “Kodak: Can it Pass the Smell Test ?”
      Did you ever wonder what would happen to the market if the Fed did not continually nudge it when it weakens ?
Ever wonder how we can survive a crisis after this one
after the Fed and U.S. government have blown it all on this one.
Perhaps it should be given some thought, because on November 4, it will be a new ball game.  Our economy must be in horrendous shape.  Clearly the Fed thinks so, and most of Congress…………and I, as well.
The Street is betting the effort by the Fed and Congress  will be successful, that the damage done by  the pandemic will pass and the economic expansion will be on the mend.
That would be a good bet if the S&P 500 were 30% lower. At current levels it does not discount any adversity.
If the Street is wrong, we are faced with a horrendous bear market as the market probes for a level that discounts future prospects.
So many new investors at these overvalued levels will get pummeled. It would take years to get back even.  At great risk are investors who will need to tap their portfolio for big ticket items like a house, education, medical expenses, or for older people who will need to access it for retirement.
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Eastman Kodak (KODK)
       Eastman Kodak’s stock soared to $60 from $1.50 two days as a result of the Trump administration’s $765 million loan to produce active pharmaceutical ingredients (API), most of which are currently produced abroad by China and India.
The loan, the first of its kind and sourced from Defense Production Act, is suspicious, since it could have been given to any number of drug companies that are already in the business.  The concept of producing these ingredients  here makes sense, since only 21% of the “essential ingredients”  for drugs are produced here.
More suspicious to me is the jump to $!0 from $1.50 at the open Tuesday followed by a surge to $60 in early trading Wednesday. Who knew about the contract in advance ?  Later in the day, Kodak’s stock settled back and closed at $33.20 yesterday.  Imagine paying $1.50 two days ago – imagine being the fool who paid $60 yesterday.
Looks like $21 is possible as traders scurry to log in gains. Sellers should come in the high 30’s.
This one STINKS !
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       Last Friday I  projected levels where the following tech leaders would find support. After sharp declines, they rebounded from my projected lows.

Projected Lows (Friday, July 24 and Wednesday’s close)

Facebook (FB): Projected low: 223  – Actual Low: 226    Close: 230
Amazon (AMZN): Projected low:2,887 – Actual Low:2,888   Close : 3,000
Apple (AAPL): Projected low: 363 – Actual Low: 356     Close: 373
Netflix (NFLX): Projected low: 466  – Actual Low: 467    Close: 488
Google (GOOG): Projected low: 1,486 -Actual Low: 1,488   Close: 1,500
Tesla (TSLA): Projected low 1,407  – Actual Low 1,366    Close: 1,499
NOTE:
Netflix (NFLX: 488) looks lower now – 461 possible
Tesla (TSLA:1,499) can slip to 1,473
    These stocks must regain leadership in order to juice the rest of the stock market.  Weakness stands to trigger a sell-off in all stocks.
That leadership would be confirmed by moves across: Facebook
(241),
Amazon (3,190), Apple ( 387), Netflix (526), Google (1,570) , Tesla (1,606), which at this  point would be a stretch.
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Downside risk is: Facebook (FB-217), Amazon (AMZN – 2,757), Apple (AAPL – 348), Netflix (NFLX – 461), Google (GOOG – 1,440), Tesla  (TSLA – 1,310).
The direction of these tech dynamos is key to the direction of the market as a whole. Together they account for 20% of the price action of the S&P 500.
Bottom Line:
Tempted to go all in, the Robinhood investors are already there, piling into KODK as it runs into the stratosphere.  I wish them well, but chasing a stock that risen twofold, fourfold, fortyfold in two days and has little to go for it but government funding, is going to burn you more often than not.  Such speculation is classic late-bull market euphoria.  While it is nice to see some old-time speculative interest versus this “watching paint dry” institutional  meandering, risks rise with prices, especially stocks that have little basis for investment.  OK, if you can buy KODK and sell it to someone else at a higher price, fine. However, eventually, someone will be left holding the bag as the stock vanishes.
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Wednesday  July 29, 2020  (DJIA: 26,379) “FAANG Stocks Need to Rebound….Or It Is Trouble”

.     It is hard  to explain the huge disconnect between the buoyant stock market and the economy  which is in recession and the ravages of COVID-19 which has infected 4.3 million and terrified everyone else.
Obviously, the Street is looking beyond the problem to a time when the economy rises out of recession and current stock prices are justified.
I don’t see it that way.  For one, COVID is crushing economies in our country and around the world.  Its impact stands to be long-lasting, even within  new treatments and  vaccines.
Then too, the S&P 500 was extremely overvalued before COVID and more so now with corporate earnings plummeting.  Additionally, we are faced with uncertainty about the result of the election in November and its impact on the economy, companies and lives.
Wall Street is betting that all is well – Don’t you !
The FAANG stocks listed below are looked upon as market leaders and for good reason, they have been hot when everything else is lukewarm.
Two weeks ago, they topped out with a dramatic one-day reversal closing at the lows for the day and trending down ever since. My blog next day (July 14), headlined, “Wall Street’s Darlings De-Fanged.”
Last Friday I  projected levels where the following tech leaders would find support. After sharp declines, they rebounded from my projected lows.

Projected Lows (Friday, July 24)

Facebook (FB): Projected low: 223  – Actual Low: 226    Close: 230
Amazon (AMZN): Projected low:2,887 – Actual Low:2,888   Close : 3,000
Apple (AAPL): Projected low: 363 – Actual Low: 356     Close: 373
Netflix (NFLX): Projected low: 466  – Actual Low: 467    Close: 488
Google (GOOG): Projected low: 1,486 -Actual Low: 1,488   Close: 1,500
Tesla (TSLA): Projected low 1,407  – Actual Low 1,366    Close: 1,476
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Facebook (FB), Amazon (AMZN), Apple (AAPL) and Google (GOOG) will report earnings Thursday.  Netflix (NFLX) and Tesla (TSLA) have already reported.
It is anyone’s guess how the Street will react to these reports.  If a company doesn’t “beat” by enough, its stock can tumble. Generally, the Street projects a bit on the low-end.
The rebound of these  stocks must be watched  closely and especially the reaction of those companies reporting this week.
These leaders must exceed the following prices in order to re-establish their leadership.  Falling short, suggests weakness which could spill over to the market as a whole.
Resistance That Must Be Overcome:
Facebook (241)
Amazon (3,190)
Apple ( 387)
Netflix (526)
Google (1,570)
Tesla (1,606).
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Downside risk from  here:
Facebook
(FB)   Tuesday close ( 230)    Risk (217)
Amazon (AMZN) Tuesday close: 3000   Risk (2757)
Apple (AAPL) Tuesday ☹373)   Risk (348)
Netflix (NFLX) Tuesday Close (488)    Risk (461)
Google (GOOG) Tuesday Close (1,500)   Risk (1,440)
Tesla  (TSLA)   Tuesday Close:  1,476   Risk (1,310)
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Bottom Line:
At some point, the stock market must adjust for adversity and uncertainty.
Technically, it is as if the market has crawled far out on a limb which will snap at some point, leading to another flash crash.
The swing factor will be the realization that a “V” recovery is not in the cards, that it will be more like an “L.,” which I have been saying for many months.
Fed Chief Powell has centerstage at 2:30 today, with no surprises. The orchestrater of Bubble #1 (December 2018 – February 2020), Powell has appeared to me to be an enabler of Republicans holding on to Senate control, even re-electing President Trump, so anything can happen.
I just think buyers will be a “no show” some day, as money managers realize how deeply our economy has been impacted and how far into  the future the problems will persist.  That would result in another flash crash (new normal).
Currently, I see a flash crash impacting the market averages as follows.
DJIA 21,500,   S&P 500: 2,534,  Nasdaq Comp. 8,028.  With major plunges, the extent is determined by what new negatives impact  the downside momentum as stocks are tumbling, and especially at those junctures where the market is attempting to find support and rebound.

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Tuesday  July 28, 2020  (DJIA: 26,584) “I Was Wrong ! The Market’s Plunge Did Not Start July 27,  But It Is Coming – Flash Crash #2
Monday July 27, the day I said  the market would begin its plunge into the fall came and went with a rise in the market averages, not a plunge.
I am undeterred in my belief it will come.
      If I can take credit for anything, it was my pinpoint  of Friday’s correction lows on of the following.  After sharp declines in early trading, these tech leaders rebounded nicely from those lows  Friday and rose again yesterday.
Facebook (FB): Projected low: 223  – Actual Low: 226    Close: 233  today
Amazon (AMZN): Projected low:2,887 – Actual Low:2,888   Close : 3,055 today
Apple (AAPL): Projected low: 363 – Actual Low: 356     Close: 379 today
Netflix (NFLX): Projected low: 466  – Actual Low: 467    Close: 495 today
Google (GOOG): Projected low: 1,486 -Actual Low: 1,488   Close: 1,530 today
Tesla (TSLA): Projected low 1,407  – Actual Low 1,366    Close: 1,539 today

These have been the market leaders for  months, driving the Nasdaq Comp. to new all-time highs when the DJIA and S&P 500 did not.
But they  turned down after  dramatic one-day reversals two weeks ago.
This week we will get a big test of their leadership as  Q2 earnings get posted.
Facebook (FB) reports earnings on Wednesday; Amazon (AMZN), Apple (AAPL) and Google (GOOG) report Thursday.  Netflix (NFLX) and Tesla (TSLA) have already reported.
The rebound of these  stocks must be watched  closely and especially the reaction of the companies reporting this week.
These leaders must exceed the following prices in order to re-establish their leadership.  Falling short, suggests weakness which could spill over to the market as a whole.
Resistance That Must Be overcome:
Facebook (241), Amazon (3,190), Apple ( 387), Netflix (526), Google (1,570) Tesla (1,606).
Bottom Line:
It is just a matter of time  until a few BIG hitters walk away, worse yet sell in-size,  and it is LIGHTS OUT.  Everyone will scramble to find a buyer for their stock – Flash Crash #2  !
Here is what is hard to understand. Knowing the historic overvaluation of most stocks, the unpredictably of COVID-19, the political unrest in our country, and potential for a severe recession/depression, how money managers can justify buying at these levels without incurring legal blowback if the market crashes.
Rally failures would be a sign that the BIG money is selling.
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Recent headlines:
“Bear Market Rally Top Looms”  (July 9 )
Bubble Burst Looms !  COVID-19 Repeat”   (July 10)
One More Spike Before Fall Plunge”   (July 13)
“Wall Street’s Darlings De-Fanged”  (July14)
Vaccine – a Gamer Changer ?”   (July 15)
“Market Turns Down July 27”  (July 16)
One More Push Before a Crunch ?”   (July 20)
“Rally to Set Up Correction”   (July 21)
“At Some Point: Market to Open – No Buyers in Sight”   (July 22)
“Last Push Before Bubble Bursts (July 27 ??)  (July 23)
“FAANG Stocks Floundering”   (July 24)
“Risk Surging in Overvalued Market”  (July 27)
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Monday, July 27, 2020 (DJIA: 26,469) “Risk Surging in Overvalued Market”
     For months I have warned that a  correction into the fall would develop, and two weeks ago I said it would start on July 27 – today.
If I am wrong about the 27th,
 I erred by going with my “gut” about a specific day, NOT that a plunge into the fall won’t happen.  It will.
Friday, I called for a spike down in the FAANG stocks, picking the price level where I expected them to rebound from, which they did.
Facebook (FB): 223  – Low: 226    Close: 230
Amazon (AMZN): 2,887 – Low:2,888     Close: 3,008
Apple (AAPL):363 – Low: 356     Close: 370
Netflix (NFLX):466  – Low: 467      Close: 480
Google (GOOG):1,486  – Low: 1,488   Close: 1,511
Tesla (TSLA):1,407  –  Low 1,366    Close: 1,417
As noted Friday, the rebound of these stocks must be watched closely. Failure to bounce sharply would be a huge warning signal for the group and market as a whole.
Danger of Disconnect:
The Street’s disconnect with what has happened, is happening and an unpredictable future, has created a highly dangerous situation, unlike anything I have seen in 58 years in this business, 52 years as a writer.
Knowing the historic overvaluation of most stocks, the unpredictably of COVID-19, the political unrest in our country, and potential for a severe recession/depression, I question how money managers can justify buying at these levels without incurring legal blowback if the market crashes.
If just a few BIG hitters walk away, worse yet sell in-size, it is LIGHTS OUT.  Everyone will scramble to find a buyer for their stock – Flash Crash #2
Look, I am not a card-carrying bear, but we are tiptoeing through a minefield here with the market close to all-time highs.   There is no guarantee that we will get an “all’s well,” when COVID is under control.  Dominos will tumble for a long time.
       I think the Street’s algos have it wrong.   Unfortunately, this is what an 11-year old Fed-nurtured economic expansion and bull market will do for objective analysis.
Stuff happens.  Between 1968 and 1981 we had four recessions and six bear markets which included domestic, international  and political upheavals – comparable in many ways to today. . The Price/earnings ratio for the bluest of chips hit single digits !
What Can “Temporarily” Delay a Sell Off :
> Effective treatment and vaccine for COVID  -19 though many months away.
> Earnings that are reported as better than expected because the projections were low-balled in the first place.
> Expect hype by the Fed, Administration and Street, on the economy and especially on  a vaccine in effort to prop the market before November 3.
> Fed or Congressional stimulus. While helping individuals and institutions, the  dire need  for yet another program highlights the deepness of our problems.
Robinhood:
      Much is reported about how well the so-called Robinhood investors are doing. While dissed as newbies, novices, inexperienced, “oddlotters”, they are making money by “buying low, and selling high,” not in penny stocks, but tech stocks, airlines, stay-at-homes, breaking news stocks, etc..
Yesterday, Bloomberg quoted Bespoke Investment Group as noting how the newbie traders were buying the dip, not even afraid to jump on companies with serious financial problems.
One warning here for these gutsy traders who you can’t help but like. There will be a dip in the market that looks like a “gift”.   Instead, it will be the kiss of death for one’s trading portfolio …… if highly leveraged – worse.
That will be the dip before a flash crash that does not snap back quickly, a bear market, or depending on how one sees this one, the test of the March lows.
So far, it has paid off for these shooters to stretch a single into a double, but the risk of test of the March 23 lows looms.
What to do:  If it works, don’t change it, but don’t get greedy and….sit close to the exit.  Cash is an investment when risks are high. For one, it protects portfolio values in the event of a flash crash (new normal), two, it can be tapped if the market craters and gives investors a “dip”…. of 30% – 45%.
Bottom Line:
At these levels, price earnings that rank with the highest ever, the market does not discount current and future adversity, not even close.  These conditions breed another flash crash, if not today, in the near future.
Rallies must be watched for indications that they lack conviction.
Rally failures are deadly, as they reflect buyers are using strength to sell.
There will be a lot of hype and misinformation as the election approaches and it can trigger rallies – beware.
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Friday  July 24, 2020 (DJIA: 26,652) “FAANG Stocks Floundering”
       On July 14, I headlined, “Wall Street’s Darlings De-Fanged” after the prior day’s   outsized one-day reversal with the close at the day’s low for  of all but one.   It signaled exhaustion for the FAANG stocks: Facebook (FB), Amazon (AMZN), Apple (AAPL), Netflix (NFLX), Microsoft (MSFT), Tesla (TSLA) which was confirmed yesterday when they plunged.
Look for a spike down in each followed by a rally which must be read closely. Buying must be aggressive, or it signals serious weakness. The Street has been quick to jump on any pullback to buy these stocks. Failure now indicates the group is in line for a major consolidation/correction.
Near-term support must hold:
Facebook (FB): 223
Amazon (AMZN): 2,887
Apple (AAPL):363
Netflix (NFLX):466
Google (GOOG):1,486
Microsoft (MSFT):
Tesla (TSLA):1,407
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Don’t believe our economy is in  dire straits ?
Walk around the block,
look to the right, look to the left.  Efficiency of getting anything done has ground to a halt. Communication sucks. The tempo of business muted.  Parents and consumers are afraid to go out. Stimulus money will be hoarded if not spent, who knows what to expect next ?  Dominos will be tumbling for a long time as the key interaction between businesses and consumers is disrupted.
Will the announcement of a treatment/vaccine help ?   Of course, but serious damage has been done to the economy and confidence  in institutions, employers and the government.
So why are stock prices more overvalued now than before COVID-19 struck ?
For one, the Street is looking beyond this crisis and economic woes to a recovery. For another, so many investment decisions are based on algorithms. It appears they aren’t programmed for an extended and severe recession/depression.
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Bottom Line:
    Two weeks ago, I picked July 27 as the day that the big correction into the fall would begin. Admittedly, news could delay that. A stimulus package would be a life-saver for some, but would be an admission that  the economy is in very serious shape.
But this bubble is due to burst.
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Thursday July 23, 2020 (DJIA: 27,005) “Last Push Before Flash Crash (July 27 ??)    The New York Weekly Economic Index (WEI) has stalled after a rebounding from depressed May/June levels, according to Axios Markets. The index covers daily and weekly consumer, labor and production  data and confirms bearish readings  compiled by Goldman Sachs, Jefferies and Oxford Economics..

Add to that, lower readings by the St. Louis Fed’s coincident employment and TSA checkpoint data and anyone paying attention has to be concerned that stock market valuations far greater than those in February before a 35% flash crash.

This doesn’t have to be complicated. This is Bubble #2, the first being a Fed-nurtured bubble between December 2018 and February 2020.

Bubbles expand until something pricks them or they burst on their own.
The S&P 500 was extremely overvalued in February before the COVID flash crash.
With corporate earnings down sharply and no assurance of a significant rebound in the future, the S&P 500 is so much more overvalued today.

Bottom Line:
       Flash crash #2 when the bubble bursts.  Expect Q2 earnings to be a better read than expected, but that is because they will be low-balled on the Street to create that effect.
The Fed, Administration and Street don’t want the party to end and will do all they can to prevent a sell off before November 3.
At some point, the market will open and there will be no buyers.
Why ? Because money managers will have difficulty justifying paying up for stocks, especially since they are well aware the future is bleak and uncertain. There is liability here.
Chief investment officer at UBS Ag, Mark Haefele, was quoted today by Bloomberg News saying, “As large asset allocators, when we look across, there are very few alternatives to equities right now.”

But at these levels, Cash is an alternative.

No,  cash doesn’t earn a return, but it protects portfolio values against losses and provides a reservoir to tap when the market is more reasonably priced.

      Risk of another flash crash is great enough to justify a cash reserve of 35% – 50%. or  more, depending on one’s tolerance for risk.
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Wednesday July 21, 2020 “At Some Point: Market to Open – No Buyers In Sight”
    For most of the Street’s tech Sweethearts, also referred to as the FAANG stocks, July 13’s one-day reversal signaled a near-term top. The following day, I headlined “Wall Street’s Darlings De-Fanged.”
    Why on earth would I take on the tech stocks, the “buy ‘em and don’t look back” stocks ?  No one else is.
That huge July 13 spike up with a close at the low for the day was a warning signal for Facebook (FB), Amazon (AMZN), Apple (AAPL), Netflix (NFLX), Microsoft (MSFT), Tesla (TSLA). So far, that spike was the “top” for all but  Google (GOOG), which had its one-day reversal yesterday.
The tech cult runs deep, everyone loves a sure thing….until reality sets in.
As if I wasn’t looking for trouble on that score, I have been calling for a major correction starting July 27, fully aware a lot of things can happen on  that day and the days to follow.
     Well, if I am  crazy enough to do this every day before the open for 11 years  (very few do),  I must step up to the plate and take my cuts  even if risking a “whiff.”
 If the market were down 30% or more, I could be more optimistic  knowing the market was discounting  a host of adversity and uncertainty from a historically overvalued level.
On July 13, I called for, “One More Spike Before a Fall Plunge.” Since then, the market has risen until yesterday.
At some point (July 27), the market will open with no buyers in sight and whoosh, down it goes, a decline that depending on what new negatives hit it when it tries to rally, could pass 35% as memories of the February/March flash crash surface.
This time, the rebound would take a lot longer.
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Tuesday July 21, 2020 (DJIA: 26,680) “Rally to Precede Correction”
Axios Markets’ Dion Rabouin claims Wall Street analysts are discussing the increasing possibility of a “blue wave” Democratic sweep of Congress and the presidency, that  Goldman Sachs, Societe General, State Street , TD Securities and UBS are preparing lists of Biden buys.
      I am not sure about that – a blue wave is not a certainty, says Ryan Detrick, senior strategist for LPL Financial.
Detrick notes that since 1928, the stock market has accurately predicted the winner of the presidential election 87% of the time when the S&P 500 was higher three months before the election, with the incumbent  party usually winning, when lower the  incumbents lost.
I am well aware investors tend to  vote their wallet. I also think the Fed, Administration (obviously) and Street are doing their best to prop the market up until November 3.
Bottom Line
If I am right about a major correction going into the November 3 election, the odds of winning favor the Democrats.
We are now getting the surge I referred to yesterday and on July 13 (“One More Spike Before Fall Plunge”). I expect it to carry through Friday with a decline starting Monday, July 27.
A lot  of good and bad can happen in this short interim to change that forecast.  I expect the $600/month to be extended over the weekend. That’s good for individuals but bad in that it would be an admission that the economy is in the very “deep stuff.”
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Monday July 20, 2020 (DJIA: 26,671) “One More Push Before a Crunch”
Last Thursday, I reminded readers that on July 6, I warned of a market sell off this month, but after one more spike up before the plunge.
I picked July 27 as the day for the beginning of the plunge which could add up to a decline of 30% – 45%, as memories of the February/March flash crash re-surface.
My reasoning is simple.  In February, the S&P 500 was historically more overvalued that at any time in the past except for the 2000 dot-com bubble.
We have so many more problems today than we had in February, why should the S&P 500 sell within 5% of February’s level ?
Aided by a half dozen monster tech stocks, the Nasdaq Comp. is in a world of its own, most of them beneficiaries of the COVID-19 shutdown.
At some point, I expect the stock market to begin discounting the damage done by COVID and measures undertaken to counter it.
I think that has to happen soon, that’s why I picked July 27, right in the middle of Q2 earnings season.
We live in an unreal world, anything can happen, investors should prepare for the worst and be glad if  less than that happens.
I expect one more push up before the big crunch. Two things are certain – uncertainty and the bizarre.
Bottom Line:
The market will attempt to nice jump up  today, as I have expected before the beginning of a sell off. Q 2 earnings will be ugly, but the Street has likely low-balled projections enough it can report “better-than-expected” results.  What a con-job !   What an unreal world.
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>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>                                                      
George Brooks
Investor’s first read.com
brooksie01@aol.com
A Game-On Analysis, LLC publication
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Investor’s first read, is a Game-On Analysis, LLC publication for which George Brooks is sole owner, manager and writer.  Neither Game-On Analysis, LLC, nor George  Brooks  is  registered as an investment advisor.  Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. References to specific securities should not be construed  as particularized or as investment advice as recommendations that you or any investors purchase or sell these securities on their own account. Readers are expected to assume full responsibility for conducting their own research pursuant to investment in keeping with their tolerance for risk.

 

 

 

 

 

 

 

 

 

 

Kodak: Can It Pass The Smell Test ?

INVESTOR’S first read.com – Daily edge before the open
DJIA: 20,539
S&P 500: 3,258
Nasdaq Comp.:10,542
Russell: 1,500
Thursday July 30, 2020    8:33 a.m.
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brooksie01@aol.com
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November 15, 2019 (DJIA – 28,004)   I Called for a bear market to start in January, that the initial plunge would be 12%-18% – “straight down.” It started mid-February, dropped 16.3%, rallied then  plunged another 32.8%.
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January 20, 2020 (DJIA:29,348) My blog,  “INSANITY,” projected a bear market decline of  30% – 45%. The DJIA plunged 38.4% in 21 days.
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With the DJIA at 18,591on March 24, I wrote that , while I see lower prices later in the year, I expect a big rally with the upside potential of DJIA 22,037 (S&P 500 : 2,617) – it went higher.
With the DJIA at 23,942 (S&P 500) on April 15, I
called for  an end to  rally, up 29% but well short of how far the rally extended.  On May 18, I began to warn of  Bubble #2
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Brief bio: In investment business 58 years, writing about stock market  for 52 years, including  investment publishers, brokers, research firms, investment bankers, plus my own investment advisories,  mostly as independent contractor to maintain independence of analysis.  “In the trenches” for every bear/bull market  since 1962. Started before  quote machines  as a tape reader/trader, posting charts by hand. Primarily  a technical analyst, but research includes fundamental, monetary, economic, psychological factors. Research recommendations/profiles of hundreds small companies.
Love rough and tumble… telling the story. CNBC-TV, Been writing investors first read.com daily before the open for 11 years. ………………………………………………………………..
      Did you ever wonder what would happen to the market if the Fed did not continually nudge it when it weakens ?
Ever wonder how we can survive a crisis after this one
after the Fed and U.S. government have blown it all on this one.
Perhaps it should be given some thought, because on November 4, it will be a new ball game.  Our economy must be in horrendous shape.  Clearly the Fed thinks so, and most of Congress…………and I, as well.
The Street is betting the effort by the Fed and Congress  will be successful, that the damage done by  the pandemic will pass and the economic expansion will be on the mend.
That would be a good bet if the S&P 500 were 30% lower. At current levels it does not discount any adversity.
If the Street is wrong, we are faced with a horrendous bear market as the market probes for a level that discounts future prospects.
So many new investors at these overvalued levels will get pummeled. It would take years to get back even.  At great risk are investors who will need to tap their portfolio for big ticket items like a house, education, medical expenses, or for older people who will need to access it for retirement.
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Eastman Kodak (KODK)
       Eastman Kodak’s stock soared to $60 from $1.50 two days as a result of the Trump administration’s $765 million loan to produce active pharmaceutical ingredients (API), most of which are currently produced abroad by China and India.
The loan, the first of its kind and sourced from Defense Production Act, is suspicious, since it could have been given to any number of drug companies that are already in the business.  The concept of producing these ingredients  here makes sense, since only 21% of the “essential ingredients”  for drugs are produced here.
More suspicious to me is the jump to $!0 from $1.50 at the open Tuesday followed by a surge to $60 in early trading Wednesday. Who knew about the contract in advance ?  Later in the day, Kodak’s stock settled back and closed at $33.20 yesterday.  Imagine paying $1.50 two days ago – imagine being the fool who paid $60 yesterday.
Looks like $21 is possible as traders scurry to log in gains. Sellers should come in the high 30’s.
This one STINKS !
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       Last Friday I  projected levels where the following tech leaders would find support. After sharp declines, they rebounded from my projected lows.

Projected Lows (Friday, July 24 and Wednesday’s close)

Facebook (FB): Projected low: 223  – Actual Low: 226    Close: 230
Amazon (AMZN): Projected low:2,887 – Actual Low:2,888   Close : 3,000
Apple (AAPL): Projected low: 363 – Actual Low: 356     Close: 373
Netflix (NFLX): Projected low: 466  – Actual Low: 467    Close: 488
Google (GOOG): Projected low: 1,486 -Actual Low: 1,488   Close: 1,500
Tesla (TSLA): Projected low 1,407  – Actual Low 1,366    Close: 1,499
NOTE:
Netflix (NFLX: 488) looks lower now – 461 possible
Tesla (TSLA:1,499) can slip to 1,473
    These stocks must regain leadership in order to juice the rest of the stock market.  Weakness stands to trigger a sell-off in all stocks.
That leadership would be confirmed by moves across: Facebook
(241),
Amazon (3,190), Apple ( 387), Netflix (526), Google (1,570) , Tesla (1,606), which at this  point would be a stretch.
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Downside risk is: Facebook (FB-217), Amazon (AMZN – 2,757), Apple (AAPL – 348), Netflix (NFLX – 461), Google (GOOG – 1,440), Tesla  (TSLA – 1,310).
The direction of these tech dynamos is key to the direction of the market as a whole. Together they account for 20% of the price action of the S&P 500.
Bottom Line:
Tempted to go all in, the Robinhood investors are already there, piling into KODK as it runs into the stratosphere.  I wish them well, but chasing a stock that risen twofold, fourfold, fortyfold in two days and has little to go for it but government funding, is going to burn you more often than not.  Such speculation is classic late-bull market euphoria.  While it is nice to see some old-time speculative interest versus this “watching paint dry” institutional  meandering, risks rise with prices, especially stocks that have little basis for investment.  OK, if you can buy KODK and sell it to someone else at a higher price, fine. However, eventually, someone will be left holding the bag as the stock vanishes.

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RECENT POSTS:
Wednesday  July 29, 2020 “FAANG Stocks Need to Rebound….Or It Is Trouble”

.     It is hard  to explain the huge disconnect between the buoyant stock market and the economy  which is in recession and the ravages of COVID-19 which has infected 4.3 million and terrified everyone else.
Obviously, the Street is looking beyond the problem to a time when the economy rises out of recession and current stock prices are justified.
I don’t see it that way.  For one, COVID is crushing economies in our country and around the world.  Its impact stands to be long-lasting, even within  new treatments and  vaccines.
Then too, the S&P 500 was extremely overvalued before COVID and more so now with corporate earnings plummeting.  Additionally, we are faced with uncertainty about the result of the election in November and its impact on the economy, companies and lives.
Wall Street is betting that all is well – Don’t you !
The FAANG stocks listed below are looked upon as market leaders and for good reason, they have been hot when everything else is lukewarm.
Two weeks ago, they topped out with a dramatic one-day reversal closing at the lows for the day and trending down ever since. My blog next day (July 14), headlined, “Wall Street’s Darlings De-Fanged.”
Last Friday I  projected levels where the following tech leaders would find support. After sharp declines, they rebounded from my projected lows.

Projected Lows (Friday, July 24)

Facebook (FB): Projected low: 223  – Actual Low: 226    Close: 230
Amazon (AMZN): Projected low:2,887 – Actual Low:2,888   Close : 3,000
Apple (AAPL): Projected low: 363 – Actual Low: 356     Close: 373
Netflix (NFLX): Projected low: 466  – Actual Low: 467    Close: 488
Google (GOOG): Projected low: 1,486 -Actual Low: 1,488   Close: 1,500
Tesla (TSLA): Projected low 1,407  – Actual Low 1,366    Close: 1,476
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Facebook (FB), Amazon (AMZN), Apple (AAPL) and Google (GOOG) will report earnings Thursday.  Netflix (NFLX) and Tesla (TSLA) have already reported.
It is anyone’s guess how the Street will react to these reports.  If a company doesn’t “beat” by enough, its stock can tumble. Generally, the Street projects a bit on the low-end.
The rebound of these  stocks must be watched  closely and especially the reaction of those companies reporting this week.
These leaders must exceed the following prices in order to re-establish their leadership.  Falling short, suggests weakness which could spill over to the market as a whole.
Resistance That Must Be Overcome:
Facebook (241)
Amazon (3,190)
Apple ( 387)
Netflix (526)
Google (1,570)
Tesla (1,606).
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Downside risk from  here:
Facebook
(FB)   Tuesday close ( 230)    Risk (217)
Amazon (AMZN) Tuesday close: 3000   Risk (2757)
Apple (AAPL) Tuesday ☹373)   Risk (348)
Netflix (NFLX) Tuesday Close (488)    Risk (461)
Google (GOOG) Tuesday Close (1,500)   Risk (1,440)
Tesla  (TSLA)   Tuesday Close:  1,476   Risk (1,310)
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Bottom Line:
At some point, the stock market must adjust for adversity and uncertainty.
Technically, it is as if the market has crawled far out on a limb which will snap at some point, leading to another flash crash.
The swing factor will be the realization that a “V” recovery is not in the cards, that it will be more like an “L.,” which I have been saying for many months.
Fed Chief Powell has centerstage at 2:30 today, with no surprises. The orchestrater of Bubble #1 (December 2018 – February 2020), Powell has appeared to me to be an enabler of Republicans holding on to Senate control, even re-electing President Trump, so anything can happen.
I just think buyers will be a “no show” some day, as money managers realize how deeply our economy has been impacted and how far into  the future the problems will persist.  That would result in another flash crash (new normal).
Currently, I see a flash crash impacting the market averages as follows.
DJIA 21,500,   S&P 500: 2,534,  Nasdaq Comp. 8,028.  With major plunges, the extent is determined by what new negatives impact  the downside momentum as stocks are tumbling, and especially at those junctures where the market is attempting to find support and rebound.


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Tuesday  July 29, 2020  “I Was Wrong ! The Market’s Plunge Did Not Start July 27,  But It Is Coming – Flash Crash #2
Monday July 27, the day I said  the market would begin its plunge into the fall came and went with a rise in the market averages, not a plunge.
I am undeterred in my belief it will come.
      If I can take credit for anything, it was my pinpoint  of Friday’s correction lows on of the following.  After sharp declines in early trading, these tech leaders rebounded nicely from those lows  Friday and rose again yesterday.
Facebook (FB): Projected low: 223  – Actual Low: 226    Close: 233  today
Amazon (AMZN): Projected low:2,887 – Actual Low:2,888   Close : 3,055 today
Apple (AAPL): Projected low: 363 – Actual Low: 356     Close: 379 today
Netflix (NFLX): Projected low: 466  – Actual Low: 467    Close: 495 today
Google (GOOG): Projected low: 1,486 -Actual Low: 1,488   Close: 1,530 today
Tesla (TSLA): Projected low 1,407  – Actual Low 1,366    Close: 1,539 today

These have been the market leaders for  months, driving the Nasdaq Comp. to new all-time highs when the DJIA and S&P 500 did not.
But they  turned down after  dramatic one-day reversals two weeks ago.
This week we will get a big test of their leadership as  Q2 earnings get posted.
Facebook (FB) reports earnings on Wednesday; Amazon (AMZN), Apple (AAPL) and Google (GOOG) report Thursday.  Netflix (NFLX) and Tesla (TSLA) have already reported.
The rebound of these  stocks must be watched  closely and especially the reaction of the companies reporting this week.
These leaders must exceed the following prices in order to re-establish their leadership.  Falling short, suggests weakness which could spill over to the market as a whole.
Resistance That Must Be overcome:
Facebook (241), Amazon (3,190), Apple ( 387), Netflix (526), Google (1,570) Tesla (1,606).
Bottom Line:
It is just a matter of time  until a few BIG hitters walk away, worse yet sell in-size,  and it is LIGHTS OUT.  Everyone will scramble to find a buyer for their stock – Flash Crash #2  !
Here is what is hard to understand. Knowing the historic overvaluation of most stocks, the unpredictably of COVID-19, the political unrest in our country, and potential for a severe recession/depression, how money managers can justify buying at these levels without incurring legal blowback if the market crashes.
Rally failures would be a sign that the BIG money is selling.
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Recent headlines:
“Bear Market Rally Top Looms”  (July 9 )
Bubble Burst Looms !  COVID-19 Repeat”   (July 10)
One More Spike Before Fall Plunge”   (July 13)
“Wall Street’s Darlings De-Fanged”  (July14)
Vaccine – a Gamer Changer ?”   (July 15)
“Market Turns Down July 27”  (July 16)
One More Push Before a Crunch ?”   (July 20)
“Rally to Set Up Correction”   (July 21)
“At Some Point: Market to Open – No Buyers in Sight”   (July 22)
“Last Push Before Bubble Bursts (July 27 ??)  (July 23)
“FAANG Stocks Floundering”   (July 24)
“Risk Surging in Overvalued Market”  (July 27)
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Monday, July 27, 2020 (DJIA: 26,469) “Risk Surging in Overvalued Market”
     For months I have warned that a  correction into the fall would develop, and two weeks ago I said it would start on July 27 – today.
If I am wrong about the 27th,
 I erred by going with my “gut” about a specific day, NOT that a plunge into the fall won’t happen.  It will.
Friday, I called for a spike down in the FAANG stocks, picking the price level where I expected them to rebound from, which they did.
Facebook (FB): 223  – Low: 226    Close: 230
Amazon (AMZN): 2,887 – Low:2,888     Close: 3,008
Apple (AAPL):363 – Low: 356     Close: 370
Netflix (NFLX):466  – Low: 467      Close: 480
Google (GOOG):1,486  – Low: 1,488   Close: 1,511
Tesla (TSLA):1,407  –  Low 1,366    Close: 1,417
As noted Friday, the rebound of these stocks must be watched closely. Failure to bounce sharply would be a huge warning signal for the group and market as a whole.
Danger of Disconnect:
The Street’s disconnect with what has happened, is happening and an unpredictable future, has created a highly dangerous situation, unlike anything I have seen in 58 years in this business, 52 years as a writer.
Knowing the historic overvaluation of most stocks, the unpredictably of COVID-19, the political unrest in our country, and potential for a severe recession/depression, I question how money managers can justify buying at these levels without incurring legal blowback if the market crashes.
If just a few BIG hitters walk away, worse yet sell in-size, it is LIGHTS OUT.  Everyone will scramble to find a buyer for their stock – Flash Crash #2
Look, I am not a card-carrying bear, but we are tiptoeing through a minefield here with the market close to all-time highs.   There is no guarantee that we will get an “all’s well,” when COVID is under control.  Dominos will tumble for a long time.
       I think the Street’s algos have it wrong.   Unfortunately, this is what an 11-year old Fed-nurtured economic expansion and bull market will do for objective analysis.
Stuff happens.  Between 1968 and 1981 we had four recessions and six bear markets which included domestic, international  and political upheavals – comparable in many ways to today. . The Price/earnings ratio for the bluest of chips hit single digits !
What Can “Temporarily” Delay a Sell Off :
> Effective treatment and vaccine for COVID  -19 though many months away.
> Earnings that are reported as better than expected because the projections were low-balled in the first place.
> Expect hype by the Fed, Administration and Street, on the economy and especially on  a vaccine in effort to prop the market before November 3.
> Fed or Congressional stimulus. While helping individuals and institutions, the  dire need  for yet another program highlights the deepness of our problems.
Robinhood:
      Much is reported about how well the so-called Robinhood investors are doing. While dissed as newbies, novices, inexperienced, “oddlotters”, they are making money by “buying low, and selling high,” not in penny stocks, but tech stocks, airlines, stay-at-homes, breaking news stocks, etc..
Yesterday, Bloomberg quoted Bespoke Investment Group as noting how the newbie traders were buying the dip, not even afraid to jump on companies with serious financial problems.
One warning here for these gutsy traders who you can’t help but like. There will be a dip in the market that looks like a “gift”.   Instead, it will be the kiss of death for one’s trading portfolio …… if highly leveraged – worse.
That will be the dip before a flash crash that does not snap back quickly, a bear market, or depending on how one sees this one, the test of the March lows.
So far, it has paid off for these shooters to stretch a single into a double, but the risk of test of the March 23 lows looms.
What to do:  If it works, don’t change it, but don’t get greedy and….sit close to the exit.  Cash is an investment when risks are high. For one, it protects portfolio values in the event of a flash crash (new normal), two, it can be tapped if the market craters and gives investors a “dip”…. of 30% – 45%.
Bottom Line:
At these levels, price earnings that rank with the highest ever, the market does not discount current and future adversity, not even close.  These conditions breed another flash crash, if not today, in the near future.
Rallies must be watched for indications that they lack conviction.
Rally failures are deadly, as they reflect buyers are using strength to sell.
There will be a lot of hype and misinformation as the election approaches and it can trigger rallies – beware.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

Friday  July 24, 2020 (DJIA: 26,652) “FAANG Stocks Floundering”
       On July 14, I headlined, “Wall Street’s Darlings De-Fanged” after the prior day’s   outsized one-day reversal with the close at the day’s low for  of all but one.   It signaled exhaustion for the FAANG stocks: Facebook (FB), Amazon (AMZN), Apple (AAPL), Netflix (NFLX), Microsoft (MSFT), Tesla (TSLA) which was confirmed yesterday when they plunged.
Look for a spike down in each followed by a rally which must be read closely. Buying must be aggressive, or it signals serious weakness. The Street has been quick to jump on any pullback to buy these stocks. Failure now indicates the group is in line for a major consolidation/correction.
Near-term support must hold:
Facebook (FB): 223
Amazon (AMZN): 2,887
Apple (AAPL):363
Netflix (NFLX):466
Google (GOOG):1,486
Microsoft (MSFT):
Tesla (TSLA):1,407
……………………………………………………………….
Don’t believe our economy is in  dire straits ?
Walk around the block,
look to the right, look to the left.  Efficiency of getting anything done has ground to a halt. Communication sucks. The tempo of business muted.  Parents and consumers are afraid to go out. Stimulus money will be hoarded if not spent, who knows what to expect next ?  Dominos will be tumbling for a long time as the key interaction between businesses and consumers is disrupted.
Will the announcement of a treatment/vaccine help ?   Of course, but serious damage has been done to the economy and confidence  in institutions, employers and the government.
So why are stock prices more overvalued now than before COVID-19 struck ?
For one, the Street is looking beyond this crisis and economic woes to a recovery. For another, so many investment decisions are based on algorithms. It appears they aren’t programmed for an extended and severe recession/depression.
………………………………………………
Bottom Line:
    Two weeks ago, I picked July 27 as the day that the big correction into the fall would begin. Admittedly, news could delay that. A stimulus package would be a life-saver for some, but would be an admission that  the economy is in very serious shape.
But this bubble is due to burst.
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Thursday July 23, 2020 (DJIA: 27,005) “Last Push Before Flash Crash (July 27 ??)    The New York Weekly Economic Index (WEI) has stalled after a rebounding from depressed May/June levels, according to Axios Markets. The index covers daily and weekly consumer, labor and production  data and confirms bearish readings  compiled by Goldman Sachs, Jefferies and Oxford Economics..

Add to that, lower readings by the St. Louis Fed’s coincident employment and TSA checkpoint data and anyone paying attention has to be concerned that stock market valuations far greater than those in February before a 35% flash crash.

This doesn’t have to be complicated. This is Bubble #2, the first being a Fed-nurtured bubble between December 2018 and February 2020.

Bubbles expand until something pricks them or they burst on their own.
The S&P 500 was extremely overvalued in February before the COVID flash crash.
With corporate earnings down sharply and no assurance of a significant rebound in the future, the S&P 500 is so much more overvalued today.

Bottom Line:
       Flash crash #2 when the bubble bursts.  Expect Q2 earnings to be a better read than expected, but that is because they will be low-balled on the Street to create that effect.
The Fed, Administration and Street don’t want the party to end and will do all they can to prevent a sell off before November 3.
At some point, the market will open and there will be no buyers.
Why ? Because money managers will have difficulty justifying paying up for stocks, especially since they are well aware the future is bleak and uncertain. There is liability here.
Chief investment officer at UBS Ag, Mark Haefele, was quoted today by Bloomberg News saying, “As large asset allocators, when we look across, there are very few alternatives to equities right now.”

But at these levels, Cash is an alternative.

No,  cash doesn’t earn a return, but it protects portfolio values against losses and provides a reservoir to tap when the market is more reasonably priced.

      Risk of another flash crash is great enough to justify a cash reserve of 35% – 50%. or  more, depending on one’s tolerance for risk.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>…………

Wednesday July 21, 2020 “At Some Point: Market to Open – No Buyers In Sight”
    For most of the Street’s tech Sweethearts, also referred to as the FAANG stocks, July 13’s one-day reversal signaled a near-term top. The following day, I headlined “Wall Street’s Darlings De-Fanged.”
    Why on earth would I take on the tech stocks, the “buy ‘em and don’t look back” stocks ?  No one else is.
That huge July 13 spike up with a close at the low for the day was a warning signal for Facebook (FB), Amazon (AMZN), Apple (AAPL), Netflix (NFLX), Microsoft (MSFT), Tesla (TSLA). So far, that spike was the “top” for all but  Google (GOOG), which had its one-day reversal yesterday.
The tech cult runs deep, everyone loves a sure thing….until reality sets in.
As if I wasn’t looking for trouble on that score, I have been calling for a major correction starting July 27, fully aware a lot of things can happen on  that day and the days to follow.
     Well, if I am  crazy enough to do this every day before the open for 11 years  (very few do),  I must step up to the plate and take my cuts  even if risking a “whiff.”
 If the market were down 30% or more, I could be more optimistic  knowing the market was discounting  a host of adversity and uncertainty from a historically overvalued level.
On July 13, I called for, “One More Spike Before a Fall Plunge.” Since then, the market has risen until yesterday.
At some point (July 27), the market will open with no buyers in sight and whoosh, down it goes, a decline that depending on what new negatives hit it when it tries to rally, could pass 35% as memories of the February/March flash crash surface.
This time, the rebound would take a lot longer.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Tuesday July 21, 2020 (DJIA: 26,680) “Rally to Precede Correction”
Axios Markets’ Dion Rabouin claims Wall Street analysts are discussing the increasing possibility of a “blue wave” Democratic sweep of Congress and the presidency, that  Goldman Sachs, Societe General, State Street , TD Securities and UBS are preparing lists of Biden buys.
      I am not sure about that – a blue wave is not a certainty, says Ryan Detrick, senior strategist for LPL Financial.
Detrick notes that since 1928, the stock market has accurately predicted the winner of the presidential election 87% of the time when the S&P 500 was higher three months before the election, with the incumbent  party usually winning, when lower the  incumbents lost.
I am well aware investors tend to  vote their wallet. I also think the Fed, Administration (obviously) and Street are doing their best to prop the market up until November 3.
Bottom Line
If I am right about a major correction going into the November 3 election, the odds of winning favor the Democrats.
We are now getting the surge I referred to yesterday and on July 13 (“One More Spike Before Fall Plunge”). I expect it to carry through Friday with a decline starting Monday, July 27.
A lot  of good and bad can happen in this short interim to change that forecast.  I expect the $600/month to be extended over the weekend. That’s good for individuals but bad in that it would be an admission that the economy is in the very “deep stuff.”
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Monday July 20, 2020 (DJIA: 26,671) “One More Push Before a Crunch”
Last Thursday, I reminded readers that on July 6, I warned of a market sell off this month, but after one more spike up before the plunge.
I picked July 27 as the day for the beginning of the plunge which could add up to a decline of 30% – 45%, as memories of the February/March flash crash re-surface.
My reasoning is simple.  In February, the S&P 500 was historically more overvalued that at any time in the past except for the 2000 dot-com bubble.
We have so many more problems today than we had in February, why should the S&P 500 sell within 5% of February’s level ?
Aided by a half dozen monster tech stocks, the Nasdaq Comp. is in a world of its own, most of them beneficiaries of the COVID-19 shutdown.
At some point, I expect the stock market to begin discounting the damage done by COVID and measures undertaken to counter it.
I think that has to happen soon, that’s why I picked July 27, right in the middle of Q2 earnings season.
We live in an unreal world, anything can happen, investors should prepare for the worst and be glad if  less than that happens.
I expect one more push up before the big crunch. Two things are certain – uncertainty and the bizarre.
Bottom Line:
The market will attempt to nice jump up  today, as I have expected before the beginning of a sell off. Q 2 earnings will be ugly, but the Street has likely low-balled projections enough it can report “better-than-expected” results.  What a con-job !   What an unreal world.
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>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>                                                      
George Brooks
Investor’s first read.com
brooksie01@aol.com
A Game-On Analysis, LLC publication
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Investor’s first read, is a Game-On Analysis, LLC publication for which George Brooks is sole owner, manager and writer.  Neither Game-On Analysis, LLC, nor George  Brooks  is  registered as an investment advisor.  Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. References to specific securities should not be construed  as particularized or as investment advice as recommendations that you or any investors purchase or sell these securities on their own account. Readers are expected to assume full responsibility for conducting their own research pursuant to investment in keeping with their tolerance for risk.

 

 

 

 

 

 

 

 

 

FAANG Stocks Need to Rebound….or It Spells Trouble

INVESTOR’S first read.com – Daily edge before the open
DJIA: 26,379
S&P 500: 3,218
Nasdaq Comp.: 10,408
Russell: 1,469
Wednesday July 29, 2020    8:53 a.m.
……………………………………..
brooksie01@aol.com
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November 15, 2019 (DJIA – 28,004)   I Called for a bear market to start in January, that the initial plunge would be 12%-18% – “straight down.” It started mid-February, dropped 16.3%, rallied then  plunged another 32.8%.
…………………………………………………..
January 20, 2020 (DJIA:29,348) My blog,  “INSANITY,” projected a bear market decline of  30% – 45%. The DJIA plunged 38.4% in 21 days.
………………………………………………….
With the DJIA at 18,591on March 24, I wrote that , while I see lower prices later in the year, I expect a big rally with the upside potential of DJIA 22,037 (S&P 500 : 2,617) – it went higher.
With the DJIA at 23,942 (S&P 500) on April 15, I
called for  an end to  rally, up 29% but well short of how far the rally extended.  On May 18, I began to warn of  Bubble #2
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Brief bio: In investment business 58 years, writing about stock market  for 52 years, including  investment publishers, brokers, research firms, investment bankers, plus my own investment advisories,  mostly as independent contractor to maintain independence of analysis.  “In the trenches” for every bear/bull market  since 1962. Started before  quote machines  as a tape reader/trader, posting charts by hand. Primarily  a technical analyst, but research includes fundamental, monetary, economic, psychological factors. Research recommendations/profiles of hundreds small companies.
Love rough and tumble… telling the story. CNBC-TV, Been writing investors first read.com daily before the open for 11 years. ………………………………………………………………..
.     It is hard  to explain the huge disconnect between the buoyant stock market and the economy  which is in recession and the ravages of COVID-19 which has infected 4.3 million and terrified everyone else.
Obviously, the Street is looking beyond the problem to a time when the economy rises out of recession and current stock prices are justified.
I don’t see it that way.  For one, COVID is crushing economies in our country and around the world.  Its impact stands to be long-lasting, even within  new treatments and  vaccines.
Then too, the S&P 500 was extremely overvalued before COVID and more so now with corporate earnings plummeting.  Additionally, we are faced with uncertainty about the result of the election in November and its impact on the economy, companies and lives.
Wall Street is betting that all is well – Don’t you !
The FAANG stocks listed below are looked upon as market leaders and for good reason, they have been hot when everything else is lukewarm.
Two weeks ago, they topped out with a dramatic one-day reversal closing at the lows for the day and trending down ever since. My blog next day (July 14), headlined, “Wall Street’s Darlings De-Fanged.”
Last Friday I  projected levels where the following tech leaders would find support. After sharp declines, they rebounded from my projected lows.

Projected Lows (Friday, July 24)

Facebook (FB): Projected low: 223  – Actual Low: 226    Close: 230
Amazon (AMZN): Projected low:2,887 – Actual Low:2,888   Close : 3,000
Apple (AAPL): Projected low: 363 – Actual Low: 356     Close: 373
Netflix (NFLX): Projected low: 466  – Actual Low: 467    Close: 488
Google (GOOG): Projected low: 1,486 -Actual Low: 1,488   Close: 1,500
Tesla (TSLA): Projected low 1,407  – Actual Low 1,366    Close: 1,476
…………………………………………………………………………………………
Facebook (FB), Amazon (AMZN), Apple (AAPL) and Google (GOOG) will report earnings Thursday.  Netflix (NFLX) and Tesla (TSLA) have already reported.
It is anyone’s guess how the Street will react to these reports.  If a company doesn’t “beat” by enough, its stock can tumble. Generally, the Street projects a bit on the low-end.
The rebound of these  stocks must be watched  closely and especially the reaction of those companies reporting this week.
These leaders must exceed the following prices in order to re-establish their leadership.  Falling short, suggests weakness which could spill over to the market as a whole.
Resistance That Must Be Overcome:
Facebook (241)
Amazon (3,190)
Apple ( 387)
Netflix (526)
Google (1,570)
Tesla (1,606).
………………………………………………………..
Downside risk from  here:
Facebook
(FB)   Tuesday close ( 230)    Risk (217)
Amazon (AMZN) Tuesday close: 3000   Risk (2757)
Apple (AAPL) Tuesday ☹373)   Risk (348)
Netflix (NFLX) Tuesday Close (488)    Risk (461)
Google (GOOG) Tuesday Close (1,500)   Risk (1,440)
Tesla  (TSLA)   Tuesday Close:  1,476   Risk (1,310)
………………………………………………………………..

Bottom Line:
At some point, the stock market must adjust for adversity and uncertainty.
Technically, it is as if the market has crawled far out on a limb which will snap at some point, leading to another flash crash.
The swing factor will be the realization that a “V” recovery is not in the cards, that it will be more like an “L.,” which I have been saying for many months.
Fed Chief Powell has centerstage at 2:30 today, with no surprises. The orchestrater of Bubble #1 (December 2018 – February 2020), Powell has appeared to me to be an enabler of Republicans holding on to Senate control, even re-electing President Trump, so anything can happen.
I just think buyers will be a “no show” some day, as money managers realize how deeply our economy has been impacted and how far into  the future the problems will persist.  That would result in another flash crash (new normal).
Currently, I see a flash crash impacting the market averages as follows.
DJIA 21,500,   S&P 500: 2,534,  Nasdaq Comp. 8,028.  With major plunges, the extent is determined by what new negatives impact  the downside momentum as stocks are tumbling, and especially at those junctures where the market is attempting to find support and rebound.
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Recent blog headlines
“Bear Market Rally Top Looms”  (July 9 )
Bubble Burst Looms !  COVID-19 Repeat”   (July 10)
One More Spike Before Fall Plunge”   (July 13)
“Wall Street’s Darlings De-Fanged”  (July14)
“Vaccine – a Gamer Changer ?”   (July 15)
“Market Turns Down July 27”  (July 16)
One More Push Before a Crunch ?”   (July 20)
“Rally to Set Up Correction”   (July 21)
“At Some Point: Market to Open – No Buyers in Sight”   (July 22)
“Last Push Before Bubble Bursts (July 27 ??)  (July 23)
“FAANG Stocks Floundering”   (July 24)
“Risk Surging in Overvalued Market”  (July 27)
“I Was Wrong ! The Market’s plunge Did Not Start July 27
But It Is Coming – Flash Crash #2”    (July 28)



RECENT POSTS:

Tuesday  July 29, 2020  “I Was Wrong ! The Market’s Plunge Did Not Start July 27,  But It Is Coming – Flash Crash #2
Monday July 27, the day I said  the market would begin its plunge into the fall came and went with a rise in the market averages, not a plunge.
I am undeterred in my belief it will come.
      If I can take credit for anything, it was my pinpoint  of Friday’s correction lows on of the following.  After sharp declines in early trading, these tech leaders rebounded nicely from those lows  Friday and rose again yesterday.
Facebook (FB): Projected low: 223  – Actual Low: 226    Close: 233  today
Amazon (AMZN): Projected low:2,887 – Actual Low:2,888   Close : 3,055 today
Apple (AAPL): Projected low: 363 – Actual Low: 356     Close: 379 today
Netflix (NFLX): Projected low: 466  – Actual Low: 467    Close: 495 today
Google (GOOG): Projected low: 1,486 -Actual Low: 1,488   Close: 1,530 today
Tesla (TSLA): Projected low 1,407  – Actual Low 1,366    Close: 1,539 today

These have been the market leaders for  months, driving the Nasdaq Comp. to new all-time highs when the DJIA and S&P 500 did not.
But they  turned down after  dramatic one-day reversals two weeks ago.
This week we will get a big test of their leadership as  Q2 earnings get posted.
Facebook (FB) reports earnings on Wednesday; Amazon (AMZN), Apple (AAPL) and Google (GOOG) report Thursday.  Netflix (NFLX) and Tesla (TSLA) have already reported.
The rebound of these  stocks must be watched  closely and especially the reaction of the companies reporting this week.
These leaders must exceed the following prices in order to re-establish their leadership.  Falling short, suggests weakness which could spill over to the market as a whole.
Resistance That Must Be overcome:
Facebook (241), Amazon (3,190), Apple ( 387), Netflix (526), Google (1,570) Tesla (1,606).
Bottom Line:
It is just a matter of time  until a few BIG hitters walk away, worse yet sell in-size,  and it is LIGHTS OUT.  Everyone will scramble to find a buyer for their stock – Flash Crash #2  !
Here is what is hard to understand. Knowing the historic overvaluation of most stocks, the unpredictably of COVID-19, the political unrest in our country, and potential for a severe recession/depression, how money managers can justify buying at these levels without incurring legal blowback if the market crashes.
Rally failures would be a sign that the BIG money is selling.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Recent headlines:
“Bear Market Rally Top Looms”  (July 9 )
Bubble Burst Looms !  COVID-19 Repeat”   (July 10)
One More Spike Before Fall Plunge”   (July 13)
“Wall Street’s Darlings De-Fanged”  (July14)
Vaccine – a Gamer Changer ?”   (July 15)
“Market Turns Down July 27”  (July 16)
One More Push Before a Crunch ?”   (July 20)
“Rally to Set Up Correction”   (July 21)
“At Some Point: Market to Open – No Buyers in Sight”   (July 22)
“Last Push Before Bubble Bursts (July 27 ??)  (July 23)
“FAANG Stocks Floundering”   (July 24)
“Risk Surging in Overvalued Market”  (July 27)
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Monday, July 27, 2020 (DJIA: 26,469) “Risk Surging in Overvalued Market”
     For months I have warned that a  correction into the fall would develop, and two weeks ago I said it would start on July 27 – today.
If I am wrong about the 27th,
 I erred by going with my “gut” about a specific day, NOT that a plunge into the fall won’t happen.  It will.
Friday, I called for a spike down in the FAANG stocks, picking the price level where I expected them to rebound from, which they did.
Facebook (FB): 223  – Low: 226    Close: 230
Amazon (AMZN): 2,887 – Low:2,888     Close: 3,008
Apple (AAPL):363 – Low: 356     Close: 370
Netflix (NFLX):466  – Low: 467      Close: 480
Google (GOOG):1,486  – Low: 1,488   Close: 1,511
Tesla (TSLA):1,407  –  Low 1,366    Close: 1,417
As noted Friday, the rebound of these stocks must be watched closely. Failure to bounce sharply would be a huge warning signal for the group and market as a whole.
Danger of Disconnect:
The Street’s disconnect with what has happened, is happening and an unpredictable future, has created a highly dangerous situation, unlike anything I have seen in 58 years in this business, 52 years as a writer.
Knowing the historic overvaluation of most stocks, the unpredictably of COVID-19, the political unrest in our country, and potential for a severe recession/depression, I question how money managers can justify buying at these levels without incurring legal blowback if the market crashes.
If just a few BIG hitters walk away, worse yet sell in-size, it is LIGHTS OUT.  Everyone will scramble to find a buyer for their stock – Flash Crash #2
Look, I am not a card-carrying bear, but we are tiptoeing through a minefield here with the market close to all-time highs.   There is no guarantee that we will get an “all’s well,” when COVID is under control.  Dominos will tumble for a long time.
       I think the Street’s algos have it wrong.   Unfortunately, this is what an 11-year old Fed-nurtured economic expansion and bull market will do for objective analysis.
Stuff happens.  Between 1968 and 1981 we had four recessions and six bear markets which included domestic, international  and political upheavals – comparable in many ways to today. . The Price/earnings ratio for the bluest of chips hit single digits !
What Can “Temporarily” Delay a Sell Off :
> Effective treatment and vaccine for COVID  -19 though many months away.
> Earnings that are reported as better than expected because the projections were low-balled in the first place.
> Expect hype by the Fed, Administration and Street, on the economy and especially on  a vaccine in effort to prop the market before November 3.
> Fed or Congressional stimulus. While helping individuals and institutions, the  dire need  for yet another program highlights the deepness of our problems.
Robinhood:
      Much is reported about how well the so-called Robinhood investors are doing. While dissed as newbies, novices, inexperienced, “oddlotters”, they are making money by “buying low, and selling high,” not in penny stocks, but tech stocks, airlines, stay-at-homes, breaking news stocks, etc..
Yesterday, Bloomberg quoted Bespoke Investment Group as noting how the newbie traders were buying the dip, not even afraid to jump on companies with serious financial problems.
One warning here for these gutsy traders who you can’t help but like. There will be a dip in the market that looks like a “gift”.   Instead, it will be the kiss of death for one’s trading portfolio …… if highly leveraged – worse.
That will be the dip before a flash crash that does not snap back quickly, a bear market, or depending on how one sees this one, the test of the March lows.
So far, it has paid off for these shooters to stretch a single into a double, but the risk of test of the March 23 lows looms.
What to do:  If it works, don’t change it, but don’t get greedy and….sit close to the exit.  Cash is an investment when risks are high. For one, it protects portfolio values in the event of a flash crash (new normal), two, it can be tapped if the market craters and gives investors a “dip”…. of 30% – 45%.
Bottom Line:
At these levels, price earnings that rank with the highest ever, the market does not discount current and future adversity, not even close.  These conditions breed another flash crash, if not today, in the near future.
Rallies must be watched for indications that they lack conviction.
Rally failures are deadly, as they reflect buyers are using strength to sell.
There will be a lot of hype and misinformation as the election approaches and it can trigger rallies – beware.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

Friday  July 24, 2020 (DJIA: 26,652) “FAANG Stocks Floundering”
       On July 14, I headlined, “Wall Street’s Darlings De-Fanged” after the prior day’s   outsized one-day reversal with the close at the day’s low for  of all but one.   It signaled exhaustion for the FAANG stocks: Facebook (FB), Amazon (AMZN), Apple (AAPL), Netflix (NFLX), Microsoft (MSFT), Tesla (TSLA) which was confirmed yesterday when they plunged.
Look for a spike down in each followed by a rally which must be read closely. Buying must be aggressive, or it signals serious weakness. The Street has been quick to jump on any pullback to buy these stocks. Failure now indicates the group is in line for a major consolidation/correction.
Near-term support must hold:
Facebook (FB): 223
Amazon (AMZN): 2,887
Apple (AAPL):363
Netflix (NFLX):466
Google (GOOG):1,486
Microsoft (MSFT):
Tesla (TSLA):1,407
……………………………………………………………….
Don’t believe our economy is in  dire straits ?
Walk around the block,
look to the right, look to the left.  Efficiency of getting anything done has ground to a halt. Communication sucks. The tempo of business muted.  Parents and consumers are afraid to go out. Stimulus money will be hoarded if not spent, who knows what to expect next ?  Dominos will be tumbling for a long time as the key interaction between businesses and consumers is disrupted.
Will the announcement of a treatment/vaccine help ?   Of course, but serious damage has been done to the economy and confidence  in institutions, employers and the government.
So why are stock prices more overvalued now than before COVID-19 struck ?
For one, the Street is looking beyond this crisis and economic woes to a recovery. For another, so many investment decisions are based on algorithms. It appears they aren’t programmed for an extended and severe recession/depression.
………………………………………………
Bottom Line:
    Two weeks ago, I picked July 27 as the day that the big correction into the fall would begin. Admittedly, news could delay that. A stimulus package would be a life-saver for some, but would be an admission that  the economy is in very serious shape.
But this bubble is due to burst.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Thursday July 23, 2020 (DJIA: 27,005) “Last Push Before Flash Crash (July 27 ??)    The New York Weekly Economic Index (WEI) has stalled after a rebounding from depressed May/June levels, according to Axios Markets. The index covers daily and weekly consumer, labor and production  data and confirms bearish readings  compiled by Goldman Sachs, Jefferies and Oxford Economics..

Add to that, lower readings by the St. Louis Fed’s coincident employment and TSA checkpoint data and anyone paying attention has to be concerned that stock market valuations far greater than those in February before a 35% flash crash.

This doesn’t have to be complicated. This is Bubble #2, the first being a Fed-nurtured bubble between December 2018 and February 2020.

Bubbles expand until something pricks them or they burst on their own.
The S&P 500 was extremely overvalued in February before the COVID flash crash.
With corporate earnings down sharply and no assurance of a significant rebound in the future, the S&P 500 is so much more overvalued today.

Bottom Line:
       Flash crash #2 when the bubble bursts.  Expect Q2 earnings to be a better read than expected, but that is because they will be low-balled on the Street to create that effect.
The Fed, Administration and Street don’t want the party to end and will do all they can to prevent a sell off before November 3.
At some point, the market will open and there will be no buyers.
Why ? Because money managers will have difficulty justifying paying up for stocks, especially since they are well aware the future is bleak and uncertain. There is liability here.
Chief investment officer at UBS Ag, Mark Haefele, was quoted today by Bloomberg News saying, “As large asset allocators, when we look across, there are very few alternatives to equities right now.”

But at these levels, Cash is an alternative.

No,  cash doesn’t earn a return, but it protects portfolio values against losses and provides a reservoir to tap when the market is more reasonably priced.

      Risk of another flash crash is great enough to justify a cash reserve of 35% – 50%. or  more, depending on one’s tolerance for risk.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>…………

Wednesday July 21, 2020 “At Some Point: Market to Open – No Buyers In Sight”
    For most of the Street’s tech Sweethearts, also referred to as the FAANG stocks, July 13’s one-day reversal signaled a near-term top. The following day, I headlined “Wall Street’s Darlings De-Fanged.”
    Why on earth would I take on the tech stocks, the “buy ‘em and don’t look back” stocks ?  No one else is.
That huge July 13 spike up with a close at the low for the day was a warning signal for Facebook (FB), Amazon (AMZN), Apple (AAPL), Netflix (NFLX), Microsoft (MSFT), Tesla (TSLA). So far, that spike was the “top” for all but  Google (GOOG), which had its one-day reversal yesterday.
The tech cult runs deep, everyone loves a sure thing….until reality sets in.
As if I wasn’t looking for trouble on that score, I have been calling for a major correction starting July 27, fully aware a lot of things can happen on  that day and the days to follow.
     Well, if I am  crazy enough to do this every day before the open for 11 years  (very few do),  I must step up to the plate and take my cuts  even if risking a “whiff.”
 If the market were down 30% or more, I could be more optimistic  knowing the market was discounting  a host of adversity and uncertainty from a historically overvalued level.
On July 13, I called for, “One More Spike Before a Fall Plunge.” Since then, the market has risen until yesterday.
At some point (July 27), the market will open with no buyers in sight and whoosh, down it goes, a decline that depending on what new negatives hit it when it tries to rally, could pass 35% as memories of the February/March flash crash surface.
This time, the rebound would take a lot longer.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Tuesday July 21, 2020 (DJIA: 26,680) “Rally to Precede Correction”
Axios Markets’ Dion Rabouin claims Wall Street analysts are discussing the increasing possibility of a “blue wave” Democratic sweep of Congress and the presidency, that  Goldman Sachs, Societe General, State Street , TD Securities and UBS are preparing lists of Biden buys.
      I am not sure about that – a blue wave is not a certainty, says Ryan Detrick, senior strategist for LPL Financial.
Detrick notes that since 1928, the stock market has accurately predicted the winner of the presidential election 87% of the time when the S&P 500 was higher three months before the election, with the incumbent  party usually winning, when lower the  incumbents lost.
I am well aware investors tend to  vote their wallet. I also think the Fed, Administration (obviously) and Street are doing their best to prop the market up until November 3.
Bottom Line
If I am right about a major correction going into the November 3 election, the odds of winning favor the Democrats.
We are now getting the surge I referred to yesterday and on July 13 (“One More Spike Before Fall Plunge”). I expect it to carry through Friday with a decline starting Monday, July 27.
A lot  of good and bad can happen in this short interim to change that forecast.  I expect the $600/month to be extended over the weekend. That’s good for individuals but bad in that it would be an admission that the economy is in the very “deep stuff.”
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

Monday July 20, 2020 (DJIA: 26,671) “One More Push Before a Crunch”
Last Thursday, I reminded readers that on July 6, I warned of a market sell off this month, but after one more spike up before the plunge.
I picked July 27 as the day for the beginning of the plunge which could add up to a decline of 30% – 45%, as memories of the February/March flash crash re-surface.
My reasoning is simple.  In February, the S&P 500 was historically more overvalued that at any time in the past except for the 2000 dot-com bubble.
We have so many more problems today than we had in February, why should the S&P 500 sell within 5% of February’s level ?
Aided by a half dozen monster tech stocks, the Nasdaq Comp. is in a world of its own, most of them beneficiaries of the COVID-19 shutdown.
At some point, I expect the stock market to begin discounting the damage done by COVID and measures undertaken to counter it.
I think that has to happen soon, that’s why I picked July 27, right in the middle of Q2 earnings season.
We live in an unreal world, anything can happen, investors should prepare for the worst and be glad if  less than that happens.
I expect one more push up before the big crunch. Two things are certain – uncertainty and the bizarre.
Bottom Line:
The market will attempt to nice jump up  today, as I have expected before the beginning of a sell off. Q 2 earnings will be ugly, but the Street has likely low-balled projections enough it can report “better-than-expected” results.  What a con-job !   What an unreal world.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>                                                      
George Brooks
Investor’s first read.com
brooksie01@aol.com
A Game-On Analysis, LLC publication
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Investor’s first read, is a Game-On Analysis, LLC publication for which George Brooks is sole owner, manager and writer.  Neither Game-On Analysis, LLC, nor George  Brooks  is  registered as an investment advisor.  Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. References to specific securities should not be construed  as particularized or as investment advice as recommendations that you or any investors purchase or sell these securities on their own account. Readers are expected to assume full responsibility for conducting their own research pursuant to investment in keeping with their tolerance for risk.

 

 

 

 

 

 

 

 

I Was Wrong ! The Market’s Plunge Did Not Start July 27 But It Is Coming – Flash Crash #2

INVESTOR’S first read.com – Daily edge before the open
DJIA: 26,584
S&P 500: 3,239
Nasdaq Comp.:10,536
Russell: 1,484
Tuesday July 28, 2020    5:48 a.m.
……………………………………..
brooksie01@aol.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

November 15, 2019 (DJIA – 28,004)   I Called for a bear market to start in January, that the initial plunge would be 12%-18% – “straight down.” It started mid-February, dropped 16.3%, rallied then  plunged another 32.8%.
…………………………………………………..
January 20, 2020 (DJIA:29,348) My blog,  “INSANITY,” projected a bear market decline of  30% – 45%. The DJIA plunged 38.4% in 21 days.
………………………………………………….
With the DJIA at 18,591on March 24, I wrote that , while I see lower prices later in the year, I expect a big rally with the upside potential of DJIA 22,037 (S&P 500 : 2,617) – it went higher.
With the DJIA at 23,942 (S&P 500) on April 15, I
called for  an end to  rally, up 29% but well short of how far the rally extended.  On May 18, I began to warn of  Bubble #2
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Brief bio: In investment business 58 years, writing about stock market  for 52 years, including  investment publishers, brokers, research firms, investment bankers, plus my own investment advisories,  mostly as independent contractor to maintain independence of analysis.  “In the trenches” for every bear/bull market  since 1962. Started before  quote machines  as a tape reader/trader, posting charts by hand. Primarily  a technical analyst, but research includes fundamental, monetary, economic, psychological factors. Research recommendations/profiles of hundreds small companies.
Love rough and tumble… telling the story. CNBC-TV, Been writing investors first read.com daily before the open for 11 years. ………………………………………………………………..
TODAY
      Monday July 27, the day I said  the market would begin its plunge into the fall came and went with a rise in the market averages, not a plunge.
I am undeterred in my belief it will come.
      If I can take credit for anything, it was my pinpoint  of Friday’s correction lows on of the following.  After sharp declines in early trading, these tech leaders rebounded nicely from those lows  Friday and rose again yesterday.
Facebook (FB): Projected low: 223  – Actual Low: 226    Close: 233  today
Amazon (AMZN): Projected low:2,887 – Actual Low:2,888   Close : 3,055 today
Apple (AAPL): Projected low: 363 – Actual Low: 356     Close: 379 today
Netflix (NFLX): Projected low: 466  – Actual Low: 467    Close: 495 today
Google (GOOG): Projected low: 1,486 -Actual Low: 1,488   Close: 1,530 today
Tesla (TSLA): Projected low 1,407  – Actual Low 1,366    Close: 1,539 today

These have been the market leaders for  months, driving the Nasdaq Comp. to new all-time highs when the DJIA and S&P 500 did not.
But they  turned down after  dramatic one-day reversals two weeks ago.
This week we will get a big test of their leadership as  Q2 earnings get posted.
Facebook (FB) reports earnings on Wednesday; Amazon (AMZN), Apple (AAPL) and Google (GOOG) report Thursday.  Netflix (NFLX) and Tesla (TSLA) have already reported.
The rebound of these  stocks must be watched  closely and especially the reaction of the companies reporting this week.
These leaders must exceed the following prices in order to re-establish their leadership.  Falling short, suggests weakness which could spill over to the market as a whole.
Resistance That Must Be overcome:
Facebook (241), Amazon (3,190), Apple ( 387), Netflix (526), Google (1,570) Tesla (1,606).
Bottom Line:
It is just a matter of time  until a few BIG hitters walk away, worse yet sell in-size,  and it is LIGHTS OUT.  Everyone will scramble to find a buyer for their stock – Flash Crash #2  !
Here is what is hard to understand. Knowing the historic overvaluation of most stocks, the unpredictably of COVID-19, the political unrest in our country, and potential for a severe recession/depression, how money managers can justify buying at these levels without incurring legal blowback if the market crashes.
Rally failures would be a sign that the BIG money is selling.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Recent headlines:
“Bear Market Rally Top Looms”  (July 9 )
Bubble Burst Looms !  COVID-19 Repeat”   (July 10)
One More Spike Before Fall Plunge”   (July 13)
“Wall Street’s Darlings De-Fanged”  (July14)
Vaccine – a Gamer Changer ?”   (July 15)
“Market Turns Down July 27”  (July 16)
One More Push Before a Crunch ?”   (July 20)
“Rally to Set Up Correction”   (July 21)
“At Some Point: Market to Open – No Buyers in Sight”   (July 22)
“Last Push Before Bubble Bursts (July 27 ??)  (July 23)
“FAANG Stocks Floundering”   (July 24)
“Risk Surging in Overvalued Market”  (July 27)
 >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
RECENT POSTS:

Monday, July 27, 2020 (DJIA: 26,469) “Risk Surging in Overvalued Market”
     For months I have warned that a  correction into the fall would develop, and two weeks ago I said it would start on July 27 – today.
If I am wrong about the 27th,
 I erred by going with my “gut” about a specific day, NOT that a plunge into the fall won’t happen.  It will.
Friday, I called for a spike down in the FAANG stocks, picking the price level where I expected them to rebound from, which they did.
Facebook (FB): 223  – Low: 226    Close: 230
Amazon (AMZN): 2,887 – Low:2,888     Close: 3,008
Apple (AAPL):363 – Low: 356     Close: 370
Netflix (NFLX):466  – Low: 467      Close: 480
Google (GOOG):1,486  – Low: 1,488   Close: 1,511
Tesla (TSLA):1,407  –  Low 1,366    Close: 1,417
As noted Friday, the rebound of these stocks must be watched closely. Failure to bounce sharply would be a huge warning signal for the group and market as a whole.
Danger of Disconnect:
The Street’s disconnect with what has happened, is happening and an unpredictable future, has created a highly dangerous situation, unlike anything I have seen in 58 years in this business, 52 years as a writer.
Knowing the historic overvaluation of most stocks, the unpredictably of COVID-19, the political unrest in our country, and potential for a severe recession/depression, I question how money managers can justify buying at these levels without incurring legal blowback if the market crashes.
If just a few BIG hitters walk away, worse yet sell in-size, it is LIGHTS OUT.  Everyone will scramble to find a buyer for their stock – Flash Crash #2
Look, I am not a card-carrying bear, but we are tiptoeing through a minefield here with the market close to all-time highs.   There is no guarantee that we will get an “all’s well,” when COVID is under control.  Dominos will tumble for a long time.
       I think the Street’s algos have it wrong.   Unfortunately, this is what an 11-year old Fed-nurtured economic expansion and bull market will do for objective analysis.
Stuff happens.  Between 1968 and 1981 we had four recessions and six bear markets which included domestic, international  and political upheavals – comparable in many ways to today. . The Price/earnings ratio for the bluest of chips hit single digits !
What Can “Temporarily” Delay a Sell Off :
> Effective treatment and vaccine for COVID  -19 though many months away.
> Earnings that are reported as better than expected because the projections were low-balled in the first place.
> Expect hype by the Fed, Administration and Street, on the economy and especially on  a vaccine in effort to prop the market before November 3.
> Fed or Congressional stimulus. While helping individuals and institutions, the  dire need  for yet another program highlights the deepness of our problems.
Robinhood:
      Much is reported about how well the so-called Robinhood investors are doing. While dissed as newbies, novices, inexperienced, “oddlotters”, they are making money by “buying low, and selling high,” not in penny stocks, but tech stocks, airlines, stay-at-homes, breaking news stocks, etc..
Yesterday, Bloomberg quoted Bespoke Investment Group as noting how the newbie traders were buying the dip, not even afraid to jump on companies with serious financial problems.
One warning here for these gutsy traders who you can’t help but like. There will be a dip in the market that looks like a “gift”.   Instead, it will be the kiss of death for one’s trading portfolio …… if highly leveraged – worse.
That will be the dip before a flash crash that does not snap back quickly, a bear market, or depending on how one sees this one, the test of the March lows.
So far, it has paid off for these shooters to stretch a single into a double, but the risk of test of the March 23 lows looms.
What to do:  If it works, don’t change it, but don’t get greedy and….sit close to the exit.  Cash is an investment when risks are high. For one, it protects portfolio values in the event of a flash crash (new normal), two, it can be tapped if the market craters and gives investors a “dip”…. of 30% – 45%.
Bottom Line:
At these levels, price earnings that rank with the highest ever, the market does not discount current and future adversity, not even close.  These conditions breed another flash crash, if not today, in the near future.
Rallies must be watched for indications that they lack conviction.
Rally failures are deadly, as they reflect buyers are using strength to sell.
There will be a lot of hype and misinformation as the election approaches and it can trigger rallies – beware.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

Friday  July 24, 2020 (DJIA: 26,652) “FAANG Stocks Floundering”
       On July 14, I headlined, “Wall Street’s Darlings De-Fanged” after the prior day’s   outsized one-day reversal with the close at the day’s low for  of all but one.   It signaled exhaustion for the FAANG stocks: Facebook (FB), Amazon (AMZN), Apple (AAPL), Netflix (NFLX), Microsoft (MSFT), Tesla (TSLA) which was confirmed yesterday when they plunged.
Look for a spike down in each followed by a rally which must be read closely. Buying must be aggressive, or it signals serious weakness. The Street has been quick to jump on any pullback to buy these stocks. Failure now indicates the group is in line for a major consolidation/correction.
Near-term support must hold:
Facebook (FB): 223
Amazon (AMZN): 2,887
Apple (AAPL):363
Netflix (NFLX):466
Google (GOOG):1,486
Microsoft (MSFT):
Tesla (TSLA):1,407
……………………………………………………………….
Don’t believe our economy is in  dire straits ?
Walk around the block,
look to the right, look to the left.  Efficiency of getting anything done has ground to a halt. Communication sucks. The tempo of business muted.  Parents and consumers are afraid to go out. Stimulus money will be hoarded if not spent, who knows what to expect next ?  Dominos will be tumbling for a long time as the key interaction between businesses and consumers is disrupted.
Will the announcement of a treatment/vaccine help ?   Of course, but serious damage has been done to the economy and confidence  in institutions, employers and the government.
So why are stock prices more overvalued now than before COVID-19 struck ?
For one, the Street is looking beyond this crisis and economic woes to a recovery. For another, so many investment decisions are based on algorithms. It appears they aren’t programmed for an extended and severe recession/depression.
………………………………………………
Bottom Line:
    Two weeks ago, I picked July 27 as the day that the big correction into the fall would begin. Admittedly, news could delay that. A stimulus package would be a life-saver for some, but would be an admission that  the economy is in very serious shape.
But this bubble is due to burst.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Thursday July 23, 2020 (DJIA: 27,005) “Last Push Before Flash Crash (July 27 ??)    The New York Weekly Economic Index (WEI) has stalled after a rebounding from depressed May/June levels, according to Axios Markets. The index covers daily and weekly consumer, labor and production  data and confirms bearish readings  compiled by Goldman Sachs, Jefferies and Oxford Economics..

Add to that, lower readings by the St. Louis Fed’s coincident employment and TSA checkpoint data and anyone paying attention has to be concerned that stock market valuations far greater than those in February before a 35% flash crash.

This doesn’t have to be complicated. This is Bubble #2, the first being a Fed-nurtured bubble between December 2018 and February 2020.

Bubbles expand until something pricks them or they burst on their own.
The S&P 500 was extremely overvalued in February before the COVID flash crash.
With corporate earnings down sharply and no assurance of a significant rebound in the future, the S&P 500 is so much more overvalued today.

Bottom Line:
       Flash crash #2 when the bubble bursts.  Expect Q2 earnings to be a better read than expected, but that is because they will be low-balled on the Street to create that effect.
The Fed, Administration and Street don’t want the party to end and will do all they can to prevent a sell off before November 3.
At some point, the market will open and there will be no buyers.
Why ? Because money managers will have difficulty justifying paying up for stocks, especially since they are well aware the future is bleak and uncertain. There is liability here.
Chief investment officer at UBS Ag, Mark Haefele, was quoted today by Bloomberg News saying, “As large asset allocators, when we look across, there are very few alternatives to equities right now.”

But at these levels, Cash is an alternative.

No,  cash doesn’t earn a return, but it protects portfolio values against losses and provides a reservoir to tap when the market is more reasonably priced.

      Risk of another flash crash is great enough to justify a cash reserve of 35% – 50%. or  more, depending on one’s tolerance for risk.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>…………

Wednesday July 21, 2020 “At Some Point: Market to Open – No Buyers In Sight”
    For most of the Street’s tech Sweethearts, also referred to as the FAANG stocks, July 13’s one-day reversal signaled a near-term top. The following day, I headlined “Wall Street’s Darlings De-Fanged.”
    Why on earth would I take on the tech stocks, the “buy ‘em and don’t look back” stocks ?  No one else is.
That huge July 13 spike up with a close at the low for the day was a warning signal for Facebook (FB), Amazon (AMZN), Apple (AAPL), Netflix (NFLX), Microsoft (MSFT), Tesla (TSLA). So far, that spike was the “top” for all but  Google (GOOG), which had its one-day reversal yesterday.
The tech cult runs deep, everyone loves a sure thing….until reality sets in.
As if I wasn’t looking for trouble on that score, I have been calling for a major correction starting July 27, fully aware a lot of things can happen on  that day and the days to follow.
     Well, if I am  crazy enough to do this every day before the open for 11 years  (very few do),  I must step up to the plate and take my cuts  even if risking a “whiff.”
 If the market were down 30% or more, I could be more optimistic  knowing the market was discounting  a host of adversity and uncertainty from a historically overvalued level.
On July 13, I called for, “One More Spike Before a Fall Plunge.” Since then, the market has risen until yesterday.
At some point (July 27), the market will open with no buyers in sight and whoosh, down it goes, a decline that depending on what new negatives hit it when it tries to rally, could pass 35% as memories of the February/March flash crash surface.
This time, the rebound would take a lot longer.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Tuesday July 21, 2020 (DJIA: 26,680) “Rally to Precede Correction”
Axios Markets’ Dion Rabouin claims Wall Street analysts are discussing the increasing possibility of a “blue wave” Democratic sweep of Congress and the presidency, that  Goldman Sachs, Societe General, State Street , TD Securities and UBS are preparing lists of Biden buys.
      I am not sure about that – a blue wave is not a certainty, says Ryan Detrick, senior strategist for LPL Financial.
Detrick notes that since 1928, the stock market has accurately predicted the winner of the presidential election 87% of the time when the S&P 500 was higher three months before the election, with the incumbent  party usually winning, when lower the  incumbents lost.
I am well aware investors tend to  vote their wallet. I also think the Fed, Administration (obviously) and Street are doing their best to prop the market up until November 3.
Bottom Line
If I am right about a major correction going into the November 3 election, the odds of winning favor the Democrats.
We are now getting the surge I referred to yesterday and on July 13 (“One More Spike Before Fall Plunge”). I expect it to carry through Friday with a decline starting Monday, July 27.
A lot  of good and bad can happen in this short interim to change that forecast.  I expect the $600/month to be extended over the weekend. That’s good for individuals but bad in that it would be an admission that the economy is in the very “deep stuff.”
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

Monday July 20, 2020 (DJIA: 26,671) “One More Push Before a Crunch”
Last Thursday, I reminded readers that on July 6, I warned of a market sell off this month, but after one more spike up before the plunge.
I picked July 27 as the day for the beginning of the plunge which could add up to a decline of 30% – 45%, as memories of the February/March flash crash re-surface.
My reasoning is simple.  In February, the S&P 500 was historically more overvalued that at any time in the past except for the 2000 dot-com bubble.
We have so many more problems today than we had in February, why should the S&P 500 sell within 5% of February’s level ?
Aided by a half dozen monster tech stocks, the Nasdaq Comp. is in a world of its own, most of them beneficiaries of the COVID-19 shutdown.
At some point, I expect the stock market to begin discounting the damage done by COVID and measures undertaken to counter it.
I think that has to happen soon, that’s why I picked July 27, right in the middle of Q2 earnings season.
We live in an unreal world, anything can happen, investors should prepare for the worst and be glad if  less than that happens.
I expect one more push up before the big crunch. Two things are certain – uncertainty and the bizarre.
Bottom Line:
The market will attempt to nice jump up  today, as I have expected before the beginning of a sell off. Q 2 earnings will be ugly, but the Street has likely low-balled projections enough it can report “better-than-expected” results.  What a con-job !   What an unreal world.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>                                                      
George Brooks
Investor’s first read.com
brooksie01@aol.com
A Game-On Analysis, LLC publication
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Investor’s first read, is a Game-On Analysis, LLC publication for which George Brooks is sole owner, manager and writer.  Neither Game-On Analysis, LLC, nor George  Brooks  is  registered as an investment advisor.  Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. References to specific securities should not be construed  as particularized or as investment advice as recommendations that you or any investors purchase or sell these securities on their own account. Readers are expected to assume full responsibility for conducting their own research pursuant to investment in keeping with their tolerance for risk.

 

 

 

 

 

 

 

Risk Surging in Overvalued Market

INVESTOR’S first read.com – Daily edge before the open
DJIA: 26,469
S&P 500: 3,215
Nasdaq Comp.:10,363
Russell: 1,467
Monday July 27, 2020    7:48 a.m.
……………………………………..
brooksie01@aol.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

November 15, 2019 (DJIA – 28,004)   I Called for a bear market to start in January, that the initial plunge would be 12%-18% – “straight down.” It started mid-February, dropped 16.3%, rallied then  plunged another 32.8%.
…………………………………………………..
January 20, 2020 (DJIA:29,348) My blog,  “INSANITY,” projected a bear market decline of  30% – 45%. The DJIA plunged 38.4% in 21 days.
………………………………………………….
With the DJIA at 18,591on March 24, I wrote that , while I see lower prices later in the year, I expect a big rally with the upside potential of DJIA 22,037 (S&P 500 : 2,617) – it went higher.
With the DJIA at 23,942 (S&P 500) on April 15, I
called for  an end to  rally, up 29% but well short of how far the rally extended.  On May 18, I began to warn of  Bubble #2
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Brief bio: In investment business 58 years, writing about stock market  for 52 years, including  investment publishers, brokers, research firms, investment bankers, plus my own investment advisories,  mostly as independent contractor to maintain independence of analysis.  “In the trenches” for every bear/bull market  since 1962. Started before  quote machines  as a tape reader/trader, posting charts by hand. Primarily  a technical analyst, but research includes fundamental, monetary, economic, psychological factors. Research recommendations/profiles of hundreds small companies.
Love rough and tumble… telling the story. CNBC-TV, Been writing investors first read.com daily before the open for 11 years. ………………………………………………………………..
TODAY
     For months I have warned that a  correction into the fall would develop, and two weeks ago I said it would start on July 27 – today.
If I am wrong about the 27th,
 I erred by going with my “gut” about a specific day, NOT that a plunge into the fall won’t happen.  It will.
Friday, I called for a spike down in the FAANG stocks, picking the price level where I expected them to rebound from, which they did.
Facebook (FB): 223  – Low: 226    Close: 230
Amazon (AMZN): 2,887 – Low:2,888     Close: 3,008
Apple (AAPL):363 – Low: 356     Close: 370
Netflix (NFLX):466  – Low: 467      Close: 480
Google (GOOG):1,486  – Low: 1,488   Close: 1,511
Tesla (TSLA):1,407  –  Low 1,366    Close: 1,417
As noted Friday, the rebound of these stocks must be watched closely. Failure to bounce sharply would be a huge warning signal for the group and market as a whole.
Danger of Disconnect:
The Street’s disconnect with what has happened, is happening and an unpredictable future, has created a highly dangerous situation, unlike anything I have seen in 58 years in this business, 52 years as a writer.
Knowing the historic overvaluation of most stocks, the unpredictably of COVID-19, the political unrest in our country, and potential for a severe recession/depression, I question how money managers can justify buying at these levels without incurring legal blowback if the market crashes.
If just a few BIG hitters walk away, worse yet sell in-size, it is LIGHTS OUT.  Everyone will scramble to find a buyer for their stock – Flash Crash #2
Look, I am not a card-carrying bear, but we are tiptoeing through a minefield here with the market close to all-time highs.   There is no guarantee that we will get an “all’s well,” when COVID is under control.  Dominos will tumble for a long time.
       I think the Street’s algos have it wrong.   Unfortunately, this is what an 11-year old Fed-nurtured economic expansion and bull market will do for objective analysis.
Stuff happens.  Between 1968 and 1981 we had four recessions and six bear markets which included domestic, international  and political upheavals – comparable in many ways to today. . The Price/earnings ratio for the bluest of chips hit single digits !
What Can “Temporarily” Delay a Sell Off :
> Effective treatment and vaccine for COVID  -19 though many months away.
> Earnings that are reported as better than expected because the projections were low-balled in the first place.
> Expect hype by the Fed, Administration and Street, on the economy and especially on  a vaccine in effort to prop the market before November 3.
> Fed or Congressional stimulus. While helping individuals and institutions, the  dire need  for yet another program highlights the deepness of our problems.
Robinhood:
      Much is reported about how well the so-called Robinhood investors are doing. While dissed as newbies, novices, inexperienced, “oddlotters”, they are making money by “buying low, and selling high,” not in penny stocks, but tech stocks, airlines, stay-at-homes, breaking news stocks, etc..
Yesterday, Bloomberg quoted Bespoke Investment Group as noting how the newbie traders were buying the dip, not even afraid to jump on companies with serious financial problems.
One warning here for these gutsy traders who you can’t help but like. There will be a dip in the market that looks like a “gift”.   Instead, it will be the kiss of death for one’s trading portfolio …… if highly leveraged – worse.
That will be the dip before a flash crash that does not snap back quickly, a bear market, or depending on how one sees this one, the test of the March lows.
So far, it has paid off for these shooters to stretch a single into a double, but the risk of test of the March 23 lows looms.
What to do:  If it works, don’t change it, but don’t get greedy and….sit close to the exit.  Cash is an investment when risks are high. For one, it protects portfolio values in the event of a flash crash (new normal), two, it can be tapped if the market craters and gives investors a “dip”…. of 30% – 45%.
Bottom Line:
At these levels, price earnings that rank with the highest ever, the market does not discount current and future adversity, not even close.  These conditions breed another flash crash, if not today, in the near future.
Rallies must be watched for indications that they lack conviction.
Rally failures are deadly, as they reflect buyers are using strength to sell.
There will be a lot of hype and misinformation as the election approaches and it can trigger rallies – beware.
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RECENT POSTS:

Friday  July 24, 2020 (DJIA: 26,652) “FAANG Stocks Floundering”
       On July 14, I headlined, “Wall Street’s Darlings De-Fanged” after the prior day’s   outsized one-day reversal with the close at the day’s low for  of all but one.   It signaled exhaustion for the FAANG stocks: Facebook (FB), Amazon (AMZN), Apple (AAPL), Netflix (NFLX), Microsoft (MSFT), Tesla (TSLA) which was confirmed yesterday when they plunged.
Look for a spike down in each followed by a rally which must be read closely. Buying must be aggressive, or it signals serious weakness. The Street has been quick to jump on any pullback to buy these stocks. Failure now indicates the group is in line for a major consolidation/correction.
Near-term support must hold:
Facebook (FB): 223
Amazon (AMZN): 2,887
Apple (AAPL):363
Netflix (NFLX):466
Google (GOOG):1,486
Microsoft (MSFT):
Tesla (TSLA):1,407
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Don’t believe our economy is in  dire straits ?
Walk around the block,
look to the right, look to the left.  Efficiency of getting anything done has ground to a halt. Communication sucks. The tempo of business muted.  Parents and consumers are afraid to go out. Stimulus money will be hoarded if not spent, who knows what to expect next ?  Dominos will be tumbling for a long time as the key interaction between businesses and consumers is disrupted.
Will the announcement of a treatment/vaccine help ?   Of course, but serious damage has been done to the economy and confidence  in institutions, employers and the government.
So why are stock prices more overvalued now than before COVID-19 struck ?
For one, the Street is looking beyond this crisis and economic woes to a recovery. For another, so many investment decisions are based on algorithms. It appears they aren’t programmed for an extended and severe recession/depression.
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Bottom Line:
    Two weeks ago, I picked July 27 as the day that the big correction into the fall would begin. Admittedly, news could delay that. A stimulus package would be a life-saver for some, but would be an admission that  the economy is in very serious shape.
But this bubble is due to burst.
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Recent headlines:
“Bear Market Rally Top Looms”  (July 9 )
Bubble Burst Looms !  COVID-19 Repeat”   (July 10)
One More Spike Before Fall Plunge”   (July 13)
“Wall Street’s Darlings De-Fanged”  (July14)
Vaccine – a Gamer Changer ?”   (July 15)
“Market Turns Down July 27”  (July 16)
One More Push Before a Crunch ?”   (July 20)
“Rally to Set Up Correction”   (July 21)
“At Some Point: Market to Open – No Buyers in Sight”   (July 22)
“Last Push Before Bubble Bursts (July 27 ??)  (July 23)
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Thursday July 23, 2020 (DJIA: 27,005) “Last Push Before Flash Crash (July 27 ??)    The New York Weekly Economic Index (WEI) has stalled after a rebounding from depressed May/June levels, according to Axios Markets. The index covers daily and weekly consumer, labor and production  data and confirms bearish readings  compiled by Goldman Sachs, Jefferies and Oxford Economics..

Add to that, lower readings by the St. Louis Fed’s coincident employment and TSA checkpoint data and anyone paying attention has to be concerned that stock market valuations far greater than those in February before a 35% flash crash.

This doesn’t have to be complicated. This is Bubble #2, the first being a Fed-nurtured bubble between December 2018 and February 2020.

Bubbles expand until something pricks them or they burst on their own.
The S&P 500 was extremely overvalued in February before the COVID flash crash.
With corporate earnings down sharply and no assurance of a significant rebound in the future, the S&P 500 is so much more overvalued today.

Bottom Line:
       Flash crash #2 when the bubble bursts.  Expect Q2 earnings to be a better read than expected, but that is because they will be low-balled on the Street to create that effect.
The Fed, Administration and Street don’t want the party to end and will do all they can to prevent a sell off before November 3.
At some point, the market will open and there will be no buyers.
Why ? Because money managers will have difficulty justifying paying up for stocks, especially since they are well aware the future is bleak and uncertain. There is liability here.
Chief investment officer at UBS Ag, Mark Haefele, was quoted today by Bloomberg News saying, “As large asset allocators, when we look across, there are very few alternatives to equities right now.”

But at these levels, Cash is an alternative.

No,  cash doesn’t earn a return, but it protects portfolio values against losses and provides a reservoir to tap when the market is more reasonably priced.

      Risk of another flash crash is great enough to justify a cash reserve of 35% – 50%. or  more, depending on one’s tolerance for risk.
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Wednesday July 21, 2020 “At Some Point: Market to Open – No Buyers In Sight”
    For most of the Street’s tech Sweethearts, also referred to as the FAANG stocks, July 13’s one-day reversal signaled a near-term top. The following day, I headlined “Wall Street’s Darlings De-Fanged.”
    Why on earth would I take on the tech stocks, the “buy ‘em and don’t look back” stocks ?  No one else is.
That huge July 13 spike up with a close at the low for the day was a warning signal for Facebook (FB), Amazon (AMZN), Apple (AAPL), Netflix (NFLX), Microsoft (MSFT), Tesla (TSLA). So far, that spike was the “top” for all but  Google (GOOG), which had its one-day reversal yesterday.
The tech cult runs deep, everyone loves a sure thing….until reality sets in.
As if I wasn’t looking for trouble on that score, I have been calling for a major correction starting July 27, fully aware a lot of things can happen on  that day and the days to follow.
     Well, if I am  crazy enough to do this every day before the open for 11 years  (very few do),  I must step up to the plate and take my cuts  even if risking a “whiff.”
 If the market were down 30% or more, I could be more optimistic  knowing the market was discounting  a host of adversity and uncertainty from a historically overvalued level.
On July 13, I called for, “One More Spike Before a Fall Plunge.” Since then, the market has risen until yesterday.
At some point (July 27), the market will open with no buyers in sight and whoosh, down it goes, a decline that depending on what new negatives hit it when it tries to rally, could pass 35% as memories of the February/March flash crash surface.
This time, the rebound would take a lot longer.
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Tuesday July 21, 2020 (DJIA: 26,680) “Rally to Precede Correction”
Axios Markets’ Dion Rabouin claims Wall Street analysts are discussing the increasing possibility of a “blue wave” Democratic sweep of Congress and the presidency, that  Goldman Sachs, Societe General, State Street , TD Securities and UBS are preparing lists of Biden buys.
      I am not sure about that – a blue wave is not a certainty, says Ryan Detrick, senior strategist for LPL Financial.
Detrick notes that since 1928, the stock market has accurately predicted the winner of the presidential election 87% of the time when the S&P 500 was higher three months before the election, with the incumbent  party usually winning, when lower the  incumbents lost.
I am well aware investors tend to  vote their wallet. I also think the Fed, Administration (obviously) and Street are doing their best to prop the market up until November 3.
Bottom Line
If I am right about a major correction going into the November 3 election, the odds of winning favor the Democrats.
We are now getting the surge I referred to yesterday and on July 13 (“One More Spike Before Fall Plunge”). I expect it to carry through Friday with a decline starting Monday, July 27.
A lot  of good and bad can happen in this short interim to change that forecast.  I expect the $600/month to be extended over the weekend. That’s good for individuals but bad in that it would be an admission that the economy is in the very “deep stuff.”
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Monday July 20, 2020 (DJIA: 26,671) “One More Push Before a Crunch”
Last Thursday, I reminded readers that on July 6, I warned of a market sell off this month, but after one more spike up before the plunge.
I picked July 27 as the day for the beginning of the plunge which could add up to a decline of 30% – 45%, as memories of the February/March flash crash re-surface.
My reasoning is simple.  In February, the S&P 500 was historically more overvalued that at any time in the past except for the 2000 dot-com bubble.
We have so many more problems today than we had in February, why should the S&P 500 sell within 5% of February’s level ?
Aided by a half dozen monster tech stocks, the Nasdaq Comp. is in a world of its own, most of them beneficiaries of the COVID-19 shutdown.
At some point, I expect the stock market to begin discounting the damage done by COVID and measures undertaken to counter it.
I think that has to happen soon, that’s why I picked July 27, right in the middle of Q2 earnings season.
We live in an unreal world, anything can happen, investors should prepare for the worst and be glad if  less than that happens.
I expect one more push up before the big crunch. Two things are certain – uncertainty and the bizarre.
Bottom Line:
The market will attempt to nice jump up  today, as I have expected before the beginning of a sell off. Q 2 earnings will be ugly, but the Street has likely low-balled projections enough it can report “better-than-expected” results.  What a con-job !   What an unreal world.
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Friday July 17, 2020 – No post
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Thursday, July 16, 2020  (DJIA:26,870) “Market Turns Down July 27.”   On July 6, I warned of a “Market sell off this month, plunge into year-end.”    In the interim I have called for “One more spike before the fall plunge.”
“When:
Today, a week from now, how about July 27 when earnings are pounding the turf ?”
“How far down ? 30%-45%”
“For how long ? Beyond November 3rd presidential election.”

Yesterday, a
MarketWatch headline  featured CNBC’s Jim Cramer’s call for a market top on July 28.  Referring to a Larry Williams chart, Cramer first sees the possibility of a 4% -5% spike before the market rolls over and heads down on  JULY 28th.
Well, you heard it here first !  It’s nice to know he is on the same page as I.
Bottom Line:
Between now and November 3, I expect more stimulus.  While that would help individuals, it would be further confirmation that our economy is in a lot more trouble than the Street believes (or admits) it is in now.
A lot can happen between now and July 27, but the bear market rally in the S&P 500, DJIA, NY Index, DJ Transports is stalling in an irregular sideways trading range, kind of like a long rotten limb of a tree that could snap at any time if given a little pressure.
This pattern resembles that of 2007 where we had irregularity, several breakouts on the upside, and two rally failures before the big plunge.
What will snap that “limb” ?
The realization that a “V” and stock market and economic recovery is going to be more like an “L.”
COVID-19 came at a time the economy was in its 11th year of expansion, a time when a recession was long overdue, more than two times the norm.  The economy was on the threshold of recession in Q4 2018, before the Fed came to the rescue with hype about the economy being “in a good place,” interest rate cuts and an unofficial QE.
COVID and measures to counter it, have had a severe impact on the economy BUT not the stock market – that has YET TO HAPPEN.
         But it will with a major slide into October/November. I picked July 27 as the start !!
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Wednesday July 15, 2020 (DJIA: 26,642) “Vaccine -a Game Changer ?”
Of course !  The question is, how much is the expectation of a vaccine already priced in a market that is only 6% below the level where the devastation of COVID-19 triggered a recession and hammered the S&P 500 down 35.6% before the rebound ?
While the market is up sharply in futures trading before the open, it cannot afford another rally failure.  Buying the open is risky.

Reportedly, there are 150 vaccines under development. Monday, Pfizer (PFE) and BioNTech received FDA permission to fast track two candidates.
After the close yesterday, a drug developed by the National Institute of Health and Moderna, Inc. announced it will begin a 30,000 person final testing for an experimental vaccine that has demonstrated  the ability to produce what are called neutralizing antibodies in the bloodstream of 45 volunteers molecules key to blocking infection comparable to those found in COVID survivors. The government hopes to have results of tests by year-end.
Expect daily disclosures of efforts to develop treatments and vaccines. Expect these announcements to goose the market at times.
What does this mean for the market ?   Hope and frustration.
Hope for the obvious reason, frustration because test results may not be known for months and there is always the possibility a vaccine wont be available for distribution until well after that.
Bottom Line:

This is the spike I referred to Monday, the one that will lead to a peak from which the market will sell off into the fall.
Standing in the way will be the Fed, Administration and Wall Street and announcements about potential vaccines and treatments for COVID-19.
Even so, stock prices can only become so overpriced that buyers walk away, opening the door for a huge sell off.
The markets responded to a one-day reversal on the downside Monday with a one-day reversal on the upside.  The key will be whether the market can  sustain a follow through today, especially with  the tech stocks, which cannot afford another rally failure.
        Kind of like a tug of war over a stream where first one side gets their feet wet, then the other side.  The key is follow through.
We are right smack in the middle of Q2 earnings season. While they will be ugly, the Street has already low-balled projections in an effort to minimize their impact.
What to do:  The nimble and savvy, can play, but sit close to the exits. Newcomers seeking their fortune can play until they get wiped out.  The rest can raise a cash  reserve in line with their tolerance for risk.
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July 14, 2020  (DJIA: 26,085“Wall Street’s Darlings De-Faang-ed”
BIG spike and reversal in the popular growth stocks yesterday.
Facebook (FB), Amazon (AMZN), Apple (AAPL), Netflix (NFLX), Google (GOOG), aka FAANG stocks, closed down for the day after huge spikes up early in the day, resulting in one-day reversals, generally a bad sign.
I had a little sparring session with the Seeking Alpha folks yesterday.  Seems like there is just a bit too much bravado about owning Apple, Netflix and the stay-at-home stocks that needed to be challenged.
There is a lot of human nature in this zoo. Any time someone feels it is safe to boast about owning a winner, the stock is due for a comeuppance.  Funny how that works.
Even so, yesterday’s blog, “One More Spike Up Before Fall Plunge, ” was referring to just  this kind of action, a big surge upward that fails to hold.
It will be important to see if these stocks can  press to new highs or if yesterday marked their all-time high.
I expect the same thing to happen to the rest of the market that happened to the  FAANG stocks, but less  dramatically.
I thought July 27 would be a good target date for the 30% – 45% slide to start, but there are a lot of balls up in the air – more stimulus, Fed/Administration/Street hype.  Lies about future earnings as Q2 reports hit the street. There is a presidential election in 18 weeks.
I am seeing the same cockiness, arrogance and denial now, that I have seen at the top of the last 14 bull markets, in varying degrees but more so in 1968 1973, 2000, and 2007.
Today’s market is different in that the Fed is trying to micro-manage it. I don’t think a bunch of corner-office bankers are smart enough to do that without creating chaos.  Markets should be allowed to find a level that discounts known and perceived positives and negatives, not micro-managed to accommodate a vision.
The result is a bubble with horrifying results when pricked. I believe the Fed was responsible for Bubble #1 between December 2018 and February 2020. I believe it is responsible for Bubble #2 between March 23 and today.
The Fed needs to be de-FAANG-ED.
Bottom Line:
The bulls won’t go gently. At some point here, today, tomorrow in a week, buyers will be a “no-show” – enter flash crash #2.
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George Brooks
Investor’s first read.com
brooksie01@aol.com
A Game-On Analysis, LLC publication
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Investor’s first read, is a Game-On Analysis, LLC publication for which George Brooks is sole owner, manager and writer.  Neither Game-On Analysis, LLC, nor George  Brooks  is  registered as an investment advisor.  Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. References to specific securities should not be construed  as particularized or as investment advice as recommendations that you or any investors purchase or sell these securities on their own account. Readers are expected to assume full responsibility for conducting their own research pursuant to investment in keeping with their tolerance for risk.