Dramatic Leadership Change

INVESTOR’S first read.com – Daily edge before the open
DJIA:29,157
S&P 500:3,550
Nasdaq Comp.: 11,713
Russell:1,705
Tuesday November 10, 2020      9:09 a.m.
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NOTE: My apologies to my website readers. I was unable to publish last Tuesday – Thursday –  I was in the hospital.
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  today.   how far the rally extended.  On May 18, I began to warn of  Bubble #2
August 6, I headline “SELL” with DJIA at 27,201 (S&P 500:3,327). Another “Fed” bubble.
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I don’t want to get sucked into the COVID-19 vaccine timing derby, but the Pfizer (PFE) – BioNTechSE (BNTX) news release yesterday before the open suggested to me other companies were on the cusp of news releases and this dynamic duo wanted to be the first.
Put enough raw meat on the floor for these stellar research firms to chew on and fortunately they’ll waste no time grinding out results.  There will be others.
There is more than one way to attack a solution to a disease and that is where we will see a host of releases in coming months.
Estimated Price Range Today:
Pfizer (PFE; 39.20)   44 – 39
BioNTech (BNTX; 104.80) 118 – 102
Moderna (MRNA:77.74)    88 – 77
AstraZeneca (AZNCF:108.20)  116 – 109
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That said, this group will upstage the popular COVID beneficiary stocks which I warned about yesterday (Apple (AAPL), Microsoft (MSFT), Facebook (FB), Netflix (NFLX), Google (GOOG), Amazon (AMZN) to mention a few.
Their prices will be deflated to erase the euphoric fat gained as the only game in town, but they are not going away. Even so, portfolios will switch to vaccine stocks and COVID recovery stocks.  Price ‘risk’ is:
Facebook (FB)    252 – 258
Amazon (AMZN: 2,600 – 2,650
Apple (AAPL)  98 – 105
Netflix (NFLX)  425 – 430
Tesla (TSLA)  315 – 320
Google (GOOG) 1,558 – 1,600
Microsoft (MSFT) 195 – 200
BOTTOM LINE:
       I don’t like buying explosive opens
. I don’t like running with the herd, especially if there is a cliff anywhere nearby.
We are knee-deep in a pandemic and too early for a coming out party.
While the rebound from a severely depressed economy may be enough to prompt the NBER to announce the recession that started in February is over, our nation, the world, will be struggling from COVID’s impact for many months.
If this is a double-dipper for the economy, it will also be one for the stock market.
It may well be anyhow.   The transition in Washington will be tenuous with a slow return to normalcy.
In its simplistic self, the Buffet Index of overvaluation for the stock market has never been higher. A ratio of stock market capitalization to GDP at around 181% is trumpeting  – take a hike.

Market Averages: Estimated Price Range for today only.
Resistance:
  DJIA: 29,580; SPX: 3,615; COMP:11,500 ;QQQ:282
Support: DJIA:28,860; S&P 500:3,540; Nasdaq:11,236 ; QQQ:272
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RECENT POSTS:
Monday November 10, 2020 (DJIA: 28,323) “SELL the Open”
     Pfizer (PFE) and BioNTechSE (BNTX) just announced   a vaccine candidate that has demonstrated evidence of efficacy against COVID-19 indicating a vaccine efficacy rate above 90%.  The company expects to produce  up to  50 million doses in 2020 and up to 1.3 billion doses in 2021. Both are working to prepare safety and manufacturing data to submit to the FDA to demonstrate safety and quality.
Obviously, this is great news.  I do not understand the haste in its release before final tests are complete unless other companies are on the verge of announcing a vaccine.
BOTTOM LINE:

As noted Friday, The Buffet Index of stock market valuation has never demonstrated a greater overvaluation of stocks.  Last week, I attributed last week’s rally to the Street’s relief that a lopsided Democratic victory wouldn’t result in  a major change, i.e. gridlock was preferred.

Now I suspect, It was known that this release was coming.
      I am bullish on the ability of the drug industry to rise to the occasion and especially bullish on the choice voters made last week.
      Euphoria will drive stocks higher at the open. The NBER may shortly announce the recession is over based on the sharp rebound from Q1 and Q2 depressed lows, but recent data suggests otherwise..
But a lot of damage has been done on top of an economy that  in its 11th year was ready for recession without COVID.
Short covering will add to panic buying at the open. I view this as an opportunity to raise enough cash to protect one’s portfolio in the event this is

a fake out.
         The beneficiaries of  COVID’s shutdown are vulnerable,  Apple (AAPL), Microsoft (MSFT), Facebook (FB), Netflix (NFLX), Google (GOOG), Amazon (AMZN) to mention a few.

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Friday November 6, 2020 (DJIA: 28,390) “Buffet Overvaluation Index Never Higher”

     The stock market soared Wednesday and Thursday when it became clear there was not going to be a lopsided Democratic victory. The Street  was settling for political  gridlock for at least two years.
That aside, nothing has changed for the better either in the economy or with COVID.
 BOTTOM LINE:
      This rally is a gift for investors to sell down to a level that discounts their tolerance for loss.
Simply stated, the Buffet Indicator, a ratio of stock market’s total market value to the  GDP has soared to new all-time high of 181%, a level far exceeding any ever achieved, greater than  the year 2000’s  159%, greater than the high of 118 reached before the 2007-2009 Great Recession.
Our nation’s economy is struggling to climb out of a recession. It may technically do that briefly  as a result of its sharp rebound from severely depressed Q2 and Q3, but I suspect it will once again plunge as economic dominoes continue to tumble.
In its simplicity, this indicator is screaming-  Stop Buying – Sell.
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Monday November 3, 2020 (DJIA: 26,501) Party Over, Rally a Trap, Worst Yet to Come”
A Biden win means a lot of painful damage control.
A Trump win means more damage.
Either way, I see a worsening of the recession and another bear market.
At these lofty levels, the stock market does not even closely  reflect the damage done over the last four years.
The stock market is vastly overvalued based on time-tested measures of value and buoyed by government stimulus and a handful of gigantic corporations whose market caps have distorted the market averages and given a phony reading  of values.
It is overvalued, because Wall Street  likes it that way and wants the party to continue indefinitely.  Not Going to happen. Fed bubble #1 burst on February 12, Fed Bubble #2 burst on October 12.
       The Fed has no reason to prop the market after tomorrow. Congress has no incentive to pass any more stimulus packages.
Covid-19 is running wild in its third major surge of infections threatening to crush an economy already on the ropes.
       If the market were down 35% from here, I would be bullish as Hell. But that’s the disconnect, it is 10% down from all-time highs and has not discounted any negatives.
BOTTOM LINE:
Look for brief rally starting today after last week’s drubbing. New buying risky, especially chasing stocks at the open. It looks like the tech stock craze of invulnerability has been shattered, rallies from here  give investors a chance to lighten up.
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Market Averages:  Estimated for today only.
 Resistance:  DJIA: 27,001; SPX:3,329 ; COMP: 11,145;QQQ:274.5
Support: DJIA:26,400 ; S&P 500:3,260  ; Nasdaq:10,500 ; QQQ:271
Note: News of a failure to reach a bill would hammer stocks.
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The news sensitivity of this market complicates picking support and resistance levels –  Changes in broker ratings and earnings reports/projections add to the difficulty. Technical-only estimates of short-term price ranges  for today are listed below.
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Today’s est. range:
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FB:
     273 -263
AMZN: 3,107 – 3,045
AAPL: 111.8 – 109
NFLX: 486 – 475
GOOG: 1,666 – 1,625
TSLA:   411 – 390
MSFT: 2.7.6 – 202
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Again, These  are “technical chart reads.” I am not checking  earnings, news, buy/sell recommendations. These levels change frequently.
Some markets are easier to read than others. I like a rough and tumble market, that’s where the opportunities are albeit risks.  That’s where “wild bid” opportunities crop up, where a bid  set well below the market for a stock can be nailed for a turn that occurs in just a fleeting second.  These are usually not at conventional support levels, but a bit below those levels. If the stock doesn’t trip it, a trader looks for the next one.  The key is cut losses short. Sometimes partial positions work better than an “all-in” strategy, especially in a news whipsaw market where the market gets jerked around by conflicting news releases.
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Friday October 30, 2020 (DJIA:26,501)  “Flash Crash Risk Rises – Nov. Buy – Lower Prices”
A chaotic month, a flash crash, but a great buying opportunity at much lower prices.
According to the Stock Trader’s Almanac, November ranks first in months to buy  for good results over the next six months.
      Yesterday’s rebound was more about a technical reaction to the plunge over the last four days than to the stellar Q3  GDP report which has been expected for weeks.  While compared with a severely depressed Q2, an annualized gain of 33.1%, it was buoyed by unprecedented government stimulus, which cannot be expected in future quarters.
Uncertainty LOOMS, the VIX is surging to reflect angst ,and small wonder,
the next 10 weeks stand to be racked with chaos, inept governance, uncertainty about WHO IS IN CHARGE.
If Trump loses he will be vindictive and out of control,  and nothing can be done about it. If he wins, the nation will be thrown into a depression, stock market crash, civil unrest and the biggest challenge to the survival of our democratic representative constitutional republic since the CIVIL WAR.
BOTTOM LINE:
With COVID on a tear, odds strongly indicate that  the economy will tank again triggering another flash crash, this one featuring a series of plunges, rallies and plunges.   Initially, I see the market averages hitting the levels below before a short-lived rally.
DJIA: 25,000
S&P 500: 3,050
Nasdaq Comp.:10,150.     

Yesterday’s  “Trader’s Hit-n-Run Buy in early trading should have served readers well, but take the profit and wait for another opportunity..   Expect a test of those lows today.

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Market Averages:  Estimated for today only.
 Resistance:  DJIA: 26,450; SPX:3,285 ; COMP:11,150 ;QQQ:275
Support: DJIA:25,790 ; S&P 500:3,200 ; Nasdaq:10,290 ; QQQ:269
Note: News of a failure to reach a bill would hammer stocks.
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The news sensitivity of this market complicates picking support and resistance levels –  Changes in broker ratings and earnings reports/projections add to the difficulty. Technical-only estimates of short-term price ranges  for today are listed below.
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Today’s est. range:              30-Day Risk
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FB:  284 – 268

AMZN: 3,243 – 3,095
AAPL: 117 – 110
NFLX: 521 – 490
GOOG: 1,672 – 1,630
TSLA: 414 – 398
MSFT: 207 – 199
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Again, These  are “technical chart reads.” I am not checking  earnings, news, buy/sell recommendations. These levels change frequently.
Some markets are easier to read than others. I like a rough and tumble market, that’s where the opportunities are albeit risks.  That’s where “wild bid” opportunities crop up, where a bid  set well below the market for a stock can be nailed for a turn that occurs in just a fleeting second.  These are usually not at conventional support levels, but a bit below those levels. If the stock doesn’t trip it, a trader looks for the next one.  The key is cut losses short. Sometimes partial positions work better than an “all-in” strategy, especially in a news whipsaw market where the market gets jerked around by conflicting news releases.
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Thursday October 29, 2020 (DJIA: 26,520) Trader’s Hit-n-Run Buy – More Downside”
     A 22-month period of stock market hype is coming to an end. It featured hype by the Fed, the Administration and the Street to prop the stock market and economy up in time for this presidential election.
Over this period, I detailed this effort, which included Fed Bubble #1 (Jan. 2019- Feb 2020, and Fed Bubble  #2 (Mar.2020 to October 2020).   Both bubbles were burst with results injurious to investors.  The Administration and Street  are understandable, the Fed  Not !
I would not be surprised if these three amigos don’t try one more time to con investors into buying into an overvalued market, especially the Fed.
Very little of the stimulus would have happened to this degree if it weren’t a presidential election year.
The sharp rebound in Q3 GDP (33.1% ann. rate)  reported this morning is deceiving in that it reflects an unprecedented government stimulus, as well as a normal “bounce” in an economy that  was  severely depressed by COVID. Axios reports the economy must still regain 40% of the $1.85 trillion lost to get back to pre-COVID GDP levels.
Q3’s GDP is a quarter-to-quarter calculation at an annual rate comparing Q3 to a very depressed Q2.
BOTTOM LINE:
     If the Street adjusts  its buy-only algos, to account for risk, we are in a bear market, since most algos will be adjusted at the same time by most institutions.
Why not adjust them ?  A third spike in COVID threatens to trigger a second plunge in the economy, this time one without stimulus. Then too, there is no urgency by the three amigos to hype the economy and stock market.
Expect a number of rallies as the market seeks to find a level that discounts  known and perceived economic, political and market valuation levels.
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With the DJIA at 28,195, I headlined “Double Top Sets Up Big Crunch,”
referring to two double tops in the DJIA and S&P 500, Sept. 2 and Oct. 2 and in a broader sense, Feb. 12 and Sept. 3.  Yesterday’s decline sets that technical phenom.
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Market Averages:  Estimated for today.
 Resistance:  DJIA:26,857; SPX:3,315 ; COMP: 11.110;QQQ:273
Support: DJIA: 25,783; S&P 500:3,165; Nasdaq:10,695 ; QQQ:264
Note: News of a failure to reach a bill would hammer stocks.
………………………………………………………………………………….
The news sensitivity of this market complicates picking support and resistance levels –  Changes in broker ratings and earnings reports/projections add to the difficulty. Technical-only estimates of short-term price ranges  for today are listed below.
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Note: Uncertainty of the election results and especially a COVID-ravaged economy going forward raise the risk of more days like yesterday.  Traders can scalp a quick hit ‘n run after another downer. Today’s est. range:
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FB:
271 – 256
AMZN: 3,191 – 3,007
AAPL: 111.8 – 104.6
NFLX: 4887 – 471
GOOG: 1,526 – 1,471
TSLA: 407 – 371
MSFT: 204 – 196
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Again, These  are “technical chart reads.” I am not checking  earnings, news, buy/sell recommendations. These levels change frequently.
Some markets are easier to read than others. I like a rough and tumble market, that’s where the opportunities are albeit risks.  That’s where “wild bid” opportunities crop up, where a bid  set well below the market for a stock can be nailed for a turn that occurs in just a fleeting second.  These are usually not at conventional support levels, but a bit below those levels. If the stock doesn’t trip it, a trader looks for the next one.  The key is cut losses short. Sometimes partial positions work better than an “all-in” strategy, especially in a news whipsaw market where the market gets jerked around by conflicting news releases.
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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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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