Has a Major Correction Started ?

INVESTOR’S first read.com – Daily edge before the open
DJIA: 28,032
S&P 500: 3,385
Nasdaq Comp.:11,050
Russell:1,552
Thursday, September 17, 2020   
8:26 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  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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The stock market was supposed to go up, not down, after Fed Chief Powell’s last attempt to hype the market before the November 3 elections.
Futures trading indicate a weak open today.
Is this the beginning of a major correction ?
     Powell, one of the three amigos I warn will hype the stock market before the election (other two: the Administration and the Street), could not have been more bullish,  forecasting a drop  in unemployment to 7.6% by year-end, 5.5% by the end of 2021, 4% by 2023.
      Interest rates will remain near zero through 2023, he said noting the Fed may increase holdings of Treasury and agency mortgage backed securities   to stave off “an even deeper financial crisis.”
Wait a minute.  An even deeper financial crisis ?   How can unemployment drop to 7.6% this year and 5% next year if we are in a deep financial crisis  and at risk of a deeper one, at that ?
The Fed now projects a drop of 3.7% by year-end compared with  projections of a 6.5% drop in June.
What we are getting now is a bounce from severely depressed levels in Q1 and Q2, whether it is a sustained recovery is anyone’s guess at this point, including an attorney turned banker.
COVID-19 is NOT going away, odds are it rebounds again in coming months, especially in face of a lax federal policy.  The key here is what happens after the “bounce” ?
Odds are, Congress will pass another stimulus bill before the elections, which is expected in an election year this important.  We shouldn’t need another stimulus unless our economy is in a huge mess, and that is further proof that Powell’s rosy projections are sheer pre-election hype.
BOTTOM LINE:
Again I say: Phony stock market, phony economy and phony administration – gaslighting 101.
Yesterday’s market should have been up big. Any time the market goes counter to the norm, it is worth stepping back to ask why.
Maybe it’s nothing, maybe this dip vanishes in a day or two.
But, maybe the BIG money used Powell’s basket of bullish goodies to SELL.
       I have been wrong on this one a number of times, however,  like the silly pink rabbit, the market has always snapped back.
       Based on accurate, time-tested measures of value, this market is seriously overvalued. That WILL BE CORRECTED and when it is it will be straight down, initially 12% – 18%, then on to a decline of 45% – 60%, depending on what hits it along the way.  All it takes is for a few big hitters to scrap their “buy with your eyes closed” algos and  WHOOSH !
INITIAL RISK IN A DECLINE:
                                                          RISK
Facebook (FB: 263)                       251
Amazon (AMZN:3,078)              2,907
Apple (AAPL: 112)                         103
Netflix: (NFLX: 483)                       437
Google (GOOG: 1,520)              1,451
Tesla (TSLA: 441)                           377
Microsoft (MSFT: 215)                 191                                                                                            >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
RECENT POSTS:
Wednesday September 17, 2020 (DJIA:28,032) “Trump Re-election: Depression and Stock Market Crash”
By now readers know where I am coming from.  No sense trying to tiptoe through this minefield, and appeal to all investors.
I think the Trump administration has done more damage to our Nation’s unity, the survival of our democratic “republic”, and our future as a nation of laws, than any foreign adversary has done, or ever dreamed of doing.
Hundreds of thousands of Americans, not one of which was a loser or sucker, gave life and limb to protect our nation from attempts to destroy it from outside or from within.
If Trump is re-elected, and the Republicans maintain control of this do-nothing Senate, we will nose-dive into a depression and chaos, a gun-toting banana republic where no one is safe, whites, people of color, not even Mr. and Mrs. “Made-it.”
       Time for the military style guns to come off the street. OK to own dozens or what it takes to be secure or up the manhood, just  not out in the public where they are dangerous and can be used to intimidate Americans.
For four years, Americans have been lied to, manipulated and disgraced, by a president who cares only for himself and a Republican Senate unwilling to even discuss 395 bills passed and brought up for consideration by the U.S. House.

That’s not what makes America great, that’s what erodes all the things we hold dear to us, all the things that pave the way for a safe and prosperous future for those who follow us.
A Biden/Harris government with total control of Congress would have a lot of pieces to pick up. The first being to solidify the security of our democratic republic versus the Trump alternative of a quasi fascist state.
Real Republicans, should go for it, in fact, they are seriously missed today.  At least they understood the rule of law and the value of the “great experiment” gifted to us 244 years ago.
Biden has worked both sides of the aisle, which must be done going forward.
Our need for diversity is not limited to differences of color, religion and preferences, but political positions the blending of which produce results.
 So, what about the stock market ?
Ten out of the last 11 recessions have been with a Republican in the White House. Re-election of Trump would make it 11 out of 12, because the current  economic “bounce” will yield to another recession in face of economic, domestic and international policies that benefit  only a tiny percent of our populace.
There have been bear markets without recessions, but never recessions without a bear market.  The 21-day 35% bear market this year  was over before any pain was dealt out.
The stock market is bubbling out of control, but can bubble further. The Street is spoiled rotten by an 11-year old economic expansion and bull market.
Last call came a long time ago, maybe 12 Bud lights or six Martinis ago.
The next bear market will be the BIG one, down 55% to 60%.
      Why ?
      Because we are living a lie, bigger than Trump’s 20,000 in 4 years. This is a phony economy, phony stock market and phony administration.
Is there any better reason to raise cash and sit close to the exits prior to that “pop” that’s heard around the world ?
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Wednesday September 16, 2020 (DJIA: 28,308)     By now readers know where I am coming from.  No sense trying to tiptoe through this minefield, and appeal to all investors.
I think the Trump administration has done more damage to our Nation’s unity, the survival of our democratic “republic”, and our future as a nation of laws, than any foreign adversary has done, or ever dreamed of doing.
Hundreds of thousands of Americans, not one of which was a loser or sucker, gave life and limb to protect our nation from attempts to destroy it from outside or from within.
If Trump is re-elected, and the Republicans maintain control of this do-nothing Senate, we will nose-dive into a depression and chaos, a gun-toting banana republic where no one is safe, whites, people of color, not even Mr. and Mrs. “Made-it.”
       Time for the military style guns to come off the street. OK to own dozens or what it takes to be secure or up the manhood, just  not out in the public where they are dangerous and can be used to intimidate Americans.
For four years, Americans have been lied to, manipulated and disgraced, by a president who cares only for himself and a Republican Senate unwilling to even discuss 395 bills passed and brought up for consideration by the U.S. House.

That’s not what makes America great, that’s what erodes all the things we hold dear to us, all the things that pave the way for a safe and prosperous future for those who follow us.
A Biden/Harris government with total control of Congress would have a lot of pieces to pick up. The first being to solidify the security of our democratic republic versus the Trump alternative of a quasi fascist state.
Real Republicans, should go for it, in fact, they are seriously missed today.  At least they understood the rule of law and the value of the “great experiment” gifted to us 244 years ago.
Biden has worked both sides of the aisle, which must be done going forward.
Our need for diversity is not limited to differences of color, religion and preferences, but political positions the blending of which produce results.
 So, what about the stock market ?
Ten out of the last 11 recessions have been with a Republican in the White House. Re-election of Trump would make it 11 out of 12, because the current  economic “bounce” will yield to another recession in face of economic, domestic and international policies that benefit  only a tiny percent of our populace.
There have been bear markets without recessions, but never recessions without a bear market.  The 21-day 35% bear market this year  was over before any pain was dealt out.
The stock market is bubbling out of control, but can bubble further. The Street is spoiled rotten by an 11-year old economic expansion and bull market.
Last call came a long time ago, maybe 12 Bud lights or six Martinis ago.
The next bear market will be the BIG one, down 55% to 60%.
      Why ?
      Because we are living a lie, bigger than Trump’s 20,000 in 4 years. This is a phony economy, phony stock market and phony administration.
Is there any better reason to raise cash and sit close to the exits prior to that “pop” that’s heard around the world          George Brooks
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Tuesday September 15, 2020 (DJIA: 27,993) “What’s Wrong With This Picture”
It appears that absolutely NOTHING can stop this bull market.
    So what if the DJIA dropped 38.4% in 21 days, the S&P 50035.4% and Nasdaq Comp. 32.6% when COVID-19 struck in February
The market came roaring back, as if a recession starting in February was fake news.
So what if there has never been a recession without a bear market.
So what if 30 million  Americans are out of work or opt not to return for fear of COVID risk.
So what if America has never been divided this much since the Civil War.
So what if we are governed by an Administration that is better known for misinformation than accurate information.
So what if we are being lied to relentlessly about issues of great significance to each and everyone of us.
So what if issues of enormous importance to young people’s future have been politicized and sidelined – environment, healthcare and the nation’s financial security.
So what if we have turned our backs on long-standing international allies.
So what if  our stock markets are more overvalued based on time tested measures of value than at any time in history.
None of this makes a difference, does it ?
Clearly not to investors who look past the warning signs, the cracks in the foundation that warn of  a bubble that won’t stop inflating until all those who “fear  missing out”  (FOMO) are on board the train they worried was leaving the station without them.”

This is the kind of stuff bubbles are made of, this is how investors get blindsided en route to financial ruin.
The Street is betting on COVID-19 simply going away, or weeding out the weaker ones while the stronger (luckier) flourish.
BOTTOM LINE:
What’s wrong with this picture ?
        Too much for comfort !
       Investors should raise cash in line with their tolerance for risk, and sit close to the exit with the rest of one’s portfolio.
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Monday September 14, 2020 (DJIA:27,993) “Post Election Hype in Drivers’ Seat”
We are in the long agonizing countdown to November 3 and it is unwinding pretty much like I have said it will.
The three amigos, the Fed, the Administration, and Street want President Trump to win and will stop at nothing to make it happen.
While  Fed Chief Powell was appointed to the job of his dreams by Trump, it cannot be assumed he owes the president anything, but he will probably not be the Chief for long after a Biden win.
Regardless of who one supports, the Fed’s support for stock prices albeit at very inflated levels will continue at least until November.  Powell has a presser at 2:30 Wednesday.
Administration hype is a given, the biggest message will be an announcement of a  treatment/vaccine  before the election, which will not give fact-checkers a chance to verify.
The Street wants the party to go on forever, which is fine as parties go, but investors are getting sucked into the market at increasingly higher and higher levels of overvaluation. Bloomberg headlines a Goldman, Deutsche opinion that “The U.S. stock selloff may be close to an end.”
BOTTOM LINE:
  The bias for the market is up, though historically September and October can be very dangerous months to own stocks
A Vaccine before election day is today’s hype with speculation that Pfizer (PFE) may be the first to present a vaccine before the election.   Wednesday, the Fed may once again goose the market with additional comments about interest rates remaining close to zero for years.
The major market indexes should be able to launch an attack on September highs (DJIA: 29,199; S&P 500: 3,588; Nasdaq Comp.: 12,074. Again, any rally failures in coming days would be a warning signal that sellers await  higher prices to unload big positions.
September and October can be dangerous months to be long stocks.  A powerful surge in stocks through October would signal a Trump re-election, major weakness would signal a change in the presidency and Senate.
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Friday  September 11, 2020 (DJIA: 27,535) “Have Street’s algos been Adjusted For Risk ?”

The bulls charged out of the gate in early trading yesterday looking like they were  ready to run the table, but hit a wall, and it was all downhill from there, taking all three major market indexes  back to test the lows hit three days ago ( DJIA: 27,464;  S&P 500: 3,329;  Nasdaq Comp.: 10,877).
In this tug of war, rally failures are key to who is really in charge.  After a rally failure yesterday where the market indexes closed at the lows for the day, the market is now probing for a level that discounts  known and perceived negatives and positives, the major one being gross overvaluation of equities.
Only six days ago the market indexes were hitting new highs.  How quickly things change.
      MY blog six days ago was headlined , A “W” not a “V” ?, warning  readers of a stall in the rebounding economic indicators from depressed levels and another plunge based on unprecedented job losses, business failures and reduced spending.
I quoted Evercore ISI’s Ernie Tedeshi as pointing out that three times as many jobs have been lost and four times as many people on government unemployment insurance than during the Great Recession of 2007 -2009.
That bear market was accompanied by a drop of 57% in the S&P 500.
Bad stuff can happen
, it has been a long time since the Great Recession.
The 35% plunge in the S&P 500 in February/March this year was over so quickly investors were not aware of its magnitude.
Put another way, the Street doesn’t respect what can happen when a real bear market roils stocks relentlessly to the point investors begin to worry if the market will ever recover, many selling out at the bottom.
BOTTOM LINE:
      The market will open once again on a positive note as some of the Street’s algorithms go into their automatic pilot mode, buying blindly without regard to looming negatives and uncertainties.
Has anything changed ?  Have analysts begun to adjust their algos for risk, resulting in a change to less buying, even selling  due to new concerns that a “V”- shaped economic recovery will be more like an “L” or a “W” ?
If suddenly reliable buying  vanishes, we will see a flash crash until stocks find a level that discounts uncertainties and negatives as economic dominoes continue to tumble once beyond a bounce off Q1 depressed levels.
SUPPORT:
DJIA: 26,967
S&P 500: 3,267
Nasdaq Comp.:10,617
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Thursday September 10, 2020 (DJIA: 27,940) “Bulls must regain momentum, or….”      When futures trading indicated a strong open for the market yesterday, I wrote that the rally throughout the day had to hold its gain or it would be a sign of weakness, i.e., no room for rally failures if you’re a bull.
      All market indexes exceeded  my resistance projections, but closed below  the day’s highs.  That is not what a robust rally looks like.
Futures indicate lower prices at the open today, so  the bulls will get another chance to demonstrate their strength. If they can override the selling at the open, they may just extend yesterday’s rally.
       Think tug of war where first one side looks like it is winning only to suddenly lose their edge when the other side gains the upper hand.
The simplicity of this analogy may not pass a quad’s need for complexity, but this is a game where humans tend to be human at times as greed and fear take the hand.
The failure of the bulls to close the day’s trading at the highs for the day indicates there are sellers out there, enough to  hold off the bulls.
We will see what the bulls have in their arsenal today.  A sharp reversal of selling between the open and 11 a.m. would lead to more upside.
However if it’s a no show by the bulls, the overdue correction I have been waiting for may by underway.
Expect an  enormous amount of unsubstantiated hype going into the election from the Fed, the  Administration and the Street. There will be talk about an economic recovery, a vaccine for COVID-19 and  a stimulus.
Resistance:
DJIA: 28,047
S&P 500:3,409
Nasdaq Comp.:11,176
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BOTTOM LINE:
      This is now a war between bulls and bears.  The bulls are hoping for a host of “fear-of-missing-out” buyers paying up for the overpriced stocks they buy, the bears are hoping for a rotation of strength out of growth stocks and into more stable industrials.  Both are historically overvalued and especially if corporate earnings fail to snap back quickly.

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Wednesday  September 9, 2020 (DJIA: 27,500) “Phony economy, phony stock market, Phony Administration”

Here is what we are faced with now:
1) the correction over the last 3 days does not erase the extreme overvaluation of the stock market indexes.
2) Buyers will step in as they have on every correction since the March 23 bear market lows and trigger a rally.
3) If that rally is powerful, the market will return to last week’s highs.
4) if the rally lacks conviction, this correction has further to go.
5) The risk of a flash crash is high. These abrupt plunges have become the new normal. So many of these institutions track the same indicators, so it stands to reason the analysts and money managers will react in the same way, first to stop buying, second to sell.
    Expect an  enormous amount of unsubstantiated hype going into the election from the Fed, the  Administration and the Street. There will be talk about an economic recovery, vaccine for COVID-19 and  a stimulus.  All bullshit !  We have seen a “bounce” in economic indicators from Q1’s  extreme lows, but odds are that’s all it is.  I expect a “W” recovery, possibly an extended “L”, but not  a “V”, as reality of the damage done by COVID hits the Street.
6) BOTTOM LINE:
Shouldn’t say this, will lose readers, be vilified by people I know, run off the road, etc., This economy is phony, stock market phony, Fed phony, and Administration phony.
At some point, all the damage that has been done to our unity as a nation, to our pursuit of healthcare solutions, to the rule of law so critical for the preservation of our democratic “republic,” to the foundations of our economy and government, and to outright decency will have to be repaired.
We are in far worse shape than we were four years ago, except the stock market it  has continued to surge.  Something has to give and I think it is the stock market, which is historically overpriced, by 30% – 45%.
Futures trading indicate a rally at the open.  It must be strong and hold its gain through the close. No room for rally failures.
RESISTANCE: Today’s rally should begin to encounter resistance at:
DJIA: 27,717
S&P 500: 3,361
Nasdaq Comp.: 10,978
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Near-term SUPPORT is:
DJIA: 27,200
S&P 500: 3,270
Nasdaq Comp.: 10,570.
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Tuesday  September 8, 2020 (DJIA: 28,133) : “Bulls on the Ropes”

The sharp sell off Thursday and Friday created a greenstick fracture in the major market averages meaning this may be the beginning of a major correction.
The DJIA stabilized after bouncing off a major up-trendline, both the S&P 500 and Nasdaq Comp. recovered after breaking their trendlines.
Essentially, that means the tug of war between bulls and bears is now favoring the bears.
Today will open on the downside to test Friday’s lows
DJIA: 27,664
S&P500: 3,349
Nasdaq Comp.: 10,875)
We must now start to study rally attempts.  Can they follow through, or do they fail.  Obviously, the latter indicates a lower market, in this case a test of the next support level at:
DJIA: 27,200
S&P 500: 3,270
Nasdaq Comp.: 10,570.
These averages should run into resistance starting at:
DJIA: 28,476
S&P 500: 3,468
Nasdaq Comp.11,474.
The future of COVID-19 defies analysis. Potential vaccines will be announced before the election, but practical application before 2021 is doubtful.
The Street is betting on an economic recovery this year, but even if the economy recovers further, continued follow through is doubtful, since so much damage has been done across the board to our economy’s infrastructure.
The timing of another stimulus package is uncertain, trade tensions remain, a number of jobs will never comeback,  and while the consumer has cash, the willingness to part with it  is a big question mark with uncertainty about the market and economy running so high.
Election rhetoric will do nothing  to  calm fears and instill confidence in government.

BOTTOM LINE:
       Why load up on stocks  when prices are so high and confidence so low ?
The stampede to buy stocks since the March 23 lows has developed into  bubble.
Every effort will be made by the three amigos (Fed, Administration, Street) to prop the market up until November 3. It will get ugly, not the environment where stocks flourish.
Odds are high that the correction will carry further than the levels I noted above.
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Friday September 4, 2020 (DJIA: 28,292) “Beware of Hype about Vaccine and Economy
DJIA down 807 pts.  (2.78%)
S&P 500 down 125 pts. (3.51%)
Nasdaq Comp. down     598 pts.  (4.9%)
Don’t tell me the algos have a conscience, or is it a smidge of acrophobia ?
      A correction was overdue with speculative fever surging and fear of missing out driving investment decisions.
Classic bubble mania.
A clue to the health of the market  will be seen today in the intensity of the rebound.
      A token rebound would be to DJIA: 28,597; S&P 500: 3,487; Nasdaq Comp.: 11,597.
Beyond that, would suggest buyers are still in panic mode.
BOTTOM LINE:
The three amigos, the Fed, Administration and Street, aren’t going to like this with 41 days left before the elections.
    Beware of:
1) in spite of yesterday’s plunge, the market is still overvalued, very overvalued based on a host of time-tested measures of value.
2) investors will be bombarded by misinformation and  baseless hype about  a vaccine and economic recovery between now and November 3.
A rally can give investors a chance to reduce risk by raising cash in line with their tolerance for risk.  A swing from growth stocks to industrials is underway with 20 of the 30 Dow Jones industrials still below pre-COVID levels.
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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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