Recession Over ? Depends on Who You Ask – Flash Crash Before Election – Good Bet

INVESTOR’S first read.com – Daily edge before the open
DJIA: 28,513
S&P 500: 3,988
Nasdaq Comp.:11,768
Russell: 1,626
Thursday October 15, 2020    8:42 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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Is the recession that started in February over ?
Depends on who you ask.
If you ask Fed Vice Chair Richard Clarida you would get a strong “maybe.” If you ask the National Bureau of Economic Research (NBER), the official scorekeeper, you’ll get a “We’ll let you know when we have waded through a host of economic date, and that could be in a day or two, on not for months !”
If you ask most struggling Americans, you’ll get a snarl.
Clarida told attendees at the Institute for International Finance conference yesterday, “This recession was by far the deepest in postwar history, but it also may go into the record books as the briefest recession in U.S. history.”
The shortest on record going back to 1857 was a 6 monther (January-July 1980), so I doubt it.
Historically, the NBER takes its time marking  the beginning and end of recessions, since its analysis encompasses a host of data.
       If you ask me, I would say the Administration is currently twisting arms, legs, and  whatever to get a declaration from the NBER before November 3.  They may take Fed Vice Chair Clarida’s quote anyhow and run with it at the Town Hall tonight.
If in fact the recession is over, why would Congress be considering another  stimulus ?
If this was not a presidential election year, would any of this be happening ?
Odds are against it, but I think they will agree  to a $1.85 trillion stimulus.
BOTTOM LINE:
     This is a phony economy: without all the Fed and Congressional  stimulus to-date, we’d be in a depression.
This is a phony stock market: vastly overpriced propped by brainless algos, which will betray their programmers any day.
This is a phony Administration: Lies, untethered divisiveness, Un-American attempt to undermine our democratic representative constitutional republic that hundreds of thousands of real Americans gave life and limb to defend.
At some point, we will pay a dear price for this behavior at the top. This may be the first time ever that there has been a stock market that has hit new all-time highs while the vast number of Americans are suffering, economically, physically, and socially.  It will adjust downward, and that downward will be devastating. 
With the prospect of a post-stimulus slump in the economy, any declaration of an end to the recession would be premature, but stranger things have happened over the last four years.
The stock market has sizzled while the economy fizzled. There is something very dangerous about that.
What if the stock market suddenly adjusted to levels that have reflected all that is happening ?
ANSWER: Flash Crash
BEWARE: The three amigos (the Fed, the Administration, and the Street) will hype the market with as much BS as they can drag out going into the election. This will trigger brief rallies that will be dangerous to chase.
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Resistance:  DJIA: 28,725; SPX: 3,521; COMP: 11901; QQQ: 295.50
Support: DJIA: 28,110;  S&P 500: 3,450; Nasdaq:11,630; QQQ: 292-286
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Follow up projection for leading growth stocks:   RISK For A DECLINE POSTED WED: SEPT. 16
My supports held up very nicely, even produced good trading opportunities.
Price: Close 9/16
          Proj. Support       Low       10/12
Facebook (FB: 263)                       251                      244       Close:     272
Amazon (AMZN:3,078)             2,907                    2,871      Close:  3,363
Apple (AAPL: 112)                         103                       103      Close:      121
Netflix: (NFLX: 483)                       437                      466       Close:      541
Google (GOOG: 1,520)              1,451                   1,406       Close:  1,568
Tesla (TSLA: 441)                           377                       407      Close:      461
Microsoft (MSFT: 215)                 191                       196       Close:      220
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I would like to try the following for the above 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 are:
FB:
272-266; AMZN: 3,363 – 3,298; AAPL:121-120; NFLX: 541- 527; GOOG: 1,568-1,540; TSLA: 461-437; MSFT: 220-217.
Obviously, a flash crash out of nowhere negates any estimates.

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RECENT POSTS:
Wednesday  October 15, 2020 (DJIA: 28,679) “Tie Game – Bulls and Bears”
Q3 earnings will hit the Street in coming weeks. With so many companies reluctant to provide guidance, there will be some surprises in both directions.
Generally S&P 500 companies are expected to log in losses on average of as much as 15%
But who knows what magic the crafters of the bottom lines can come up with ?
It can be a hazardous venture for anyone buying before an earnings report, worse yet, are analysts  revisions for the next quarter along with those deadly downgrades.
      Analyst ratings include: Strong Buy, Buy, outperform, overweight, Accumulate Neutral, Market Perform, Market Underperform, Underweight and more.
Just a seemingly minor downgrade can hammer a stock, like Buy from Strong Buy.     With so much uncertainty and potential for  surprises, ratings changes will increase, hazardous for holders of stocks as well as short sellers
BOTTOM LINE:
We could be tracing out a major double top September 3rd and now.  We  are experiencing an economic rebound from the extreme lows posted in March and April.  The key is follow through.  Can the rebound get legs, or has too much internal damage  been done ? Too early to tell.
As noted repeatedly, the S&P 500 is historically very overvalued. Its Price to Sales ratio  is out of sight relative to the past.  The same for its Price to Earnings ratio/
       At some point, the market must adjust to reality, a level that discounts known and perceived positives and negatives. Odds indicate that would be lower, but the “fever” on the Street is running hot, and it will take a major break in ranks by institutions to send the market down. That can happen at any moment.  Investors are sitting on major gains, which must be locked in at some point….before the market plunges.

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Resistance:  DJIA: 28,725; SPX: 3,521; COMP: 11901; QQQ: 295.50
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Follow up projection for leading growth stocks:   RISK For A DECLINE POSTED WED: SEPT. 16
My supports held up very nicely, even produced good trading opportunities.
Price: Close 9/16
          Proj. Support       Low       10/12
Facebook (FB: 263)                       251                      244       Close:     276
Amazon (AMZN:3,078)             2,907                    2,871      Close:  3,443
Apple (AAPL: 112)                         103                       103      Close:      121
Netflix: (NFLX: 483)                       437                      466       Close:      544
Google (GOOG: 1,520)              1,451                   1,406       Close:  1,571
Tesla (TSLA: 441)                           377                       407      Close:      446
Microsoft (MSFT: 215)                 191                       196       Close:      223
Key near-term resistance: The news sensitivity of this market complicates picking support and resistance levels – down one day on news, up the next. It looks like we are seeing short covering in the techs, new buying risky. RESISTANCE STARTS: FB:279; AMZN:3,379; AAPL: 123*; NFLX: 571*; GOOG: 1,595*; TSLA: 454; MSFT: 230 * Update
Note: GOOG and NFLX are showing bids above Tuesday’s close.
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Tuesday October 14, 2020 (DJIA: 28,679) “Big Blow-Off Techs – Q3 Earnings Loom”
Shortly, Q3 earnings will hit the Street with tech stocks looking better, but the S&P 500 logging in a loss of 15% or worse.  That could explain the surge in tech stocks yesterday.
The gap open is indicative of panicked short covering .
If the S&P 500 was overvalued before COVID-19 struck, how overvalued is it now that corporate earnings are lower and the economy needs yet another stimulus package to survive ?
Economically, we are experiencing a sharp rebound from severely depressed economic conditions in Q1 and Q2.  The Street is expecting the rebound to continue, however 30 million Americans are still out of work, businesses are still closing, and COVID is on a tear in 29 states as we enter the Flu season.
Without unprecedented Fed and government stimulation packages, we would be in a depression.
Two different methods of calculating the price/earnings ratio of the S&P 500 indicate the S&P is anywhere from 42% (FactSet) tom 90% (Shiller) overvalued compared to  a 10-yeararithmetic mean.
Let’s toss out the Shiller P/E and we are still seriously overvalued.
Why ?  I blame the buy-biased algorithms used by many institutions  to value the stock market.
As noted yesterday when I quoted Goldman’s Amy Joseph Cohen  who is warning of significant downside risk. She agrees that many of the variables faced today “can’t fit into our models.”
      If this is true for most of the Street’s models (algos), the market is extremely vulnerable in light of the overvaluation reflected in the S&P 500’s P/Es.
BOTTOM LINE:
Yesterday’s headline here was, “Short Squeeze in Techs- Potential for Plunge Rises.”  I called the market’s action a “second and final top,” a “death knell” for the rebound since March as uncertainty about chaos in the election process on top of a dysfunctional administration weigh-in on investor confidence.
That, I noted,  would chop the market off at the knees.
Already we are seeing problems for voters. Technical problems caused voters hours of waiting in Atlanta. This will get ugly.
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Resistance:  DJIA: 28,895; SPX: 3,540; COMP: 12,000; QQQ: 301
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Follow up projection for leading growth stocks:   RISK For A DECLINE POSTED WED: SEPT. 16
My supports held up very nicely, even produced good trading opportunities.
Price: Close 9/16
          Proj. Support       Low       10/12
Facebook (FB: 263)                       251                      244       Close:     275
Amazon (AMZN:3,078)             2,907                    2,871      Close:  3,442
Apple (AAPL: 112)                         103                       103      Close:      124
Netflix: (NFLX: 483)                       437                      466       Close:      540
Google (GOOG: 1,520)              1,451                   1,406       Close:  1,569
Tesla (TSLA: 441)                           377                       407      Close:      442
Microsoft (MSFT: 215)                 191                       196       Close:      221
Key near-term resistance: The news sensitivity of this market complicates picking support and resistance levels – down one day on news, up the next. It looks like we are seeing short covering in the techs, new buying risky. RESISTANCE STARTS: FB:279; AMZN:3,379*; AAPL: 131; NFLX: 547; GOOG: 1,583*; TSLA: 454*; MSFT: 225        * Update
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Monday October 12, 2020 (DJIA:28,586) “Short Squeeze in Techs – Potential for Plunge Rises”

This looks like  the second and final top in the recovery that started March 23 is underway. I still expect another stimulus package, so that may extend it.
It looks like a short squeeze in Techs and spike in the  rest of market, dangerous because a lot of investors will be fooled.
A MarketWatch headline Friday, “Goldman’s Abby Joseph Cohen Warns Over Considerable Market Downside” called attention to something I have warned about for over a year.
 The highly regarded market strategist told Bloomberg TV, “I am quite concerned that there could be considerable downside, depending on factors that we can’t fit into our models.”
The KEY here is her reference to “factors we can’t fit into our models.”
That’s the problem, that’s why the buy-only algos , which  have been in the drivers seat for years except  for  a 21-day flash crash in February/March, are not reflecting reality.
Her models, as well as many on the Streets, have not been programmed to factor in all the uncertainties and negatives looming out there well past election day.  The market’s action is grossly misleading. The market has been overvalued for more than a year, because the Street’s algos have not been programmed for what is happening.
Nothing in our past compares to what we are facing now. The prospect of an long contested election result, potential for bloodshed, and the potential for armed insurrection if our authoritarian president refuses to accept  loss and his ability to orchestrate division between Americans.
Michigan is an example, the foiled attempt to kidnap its Democratic governor by a well-armed militia group.
BOTTOM LINE:
This rally could be the death knell for the market’s rebound from the March lows.  I would like to think the recent strength reflects to possibility of a Democrat sweep in November, December, January or however long it takes to finalize the results, but the market’s extreme overvaluation suggests the need for a correction.
Looming out there is the potential for chaos, a dysfunctional government becoming extremely dysfunctional, an interruption of the basic day-in and day-out functioning of our government, a question about who is in charge.
That would chop the market off at the knees.
       With Cohen’s admission that her “models” cannot factor-in what is happening now, she is really suggesting that most of the models (algos)  can’t factor-in what is happening now and are giving us a false read on the market’s strength and  therefore vulnerability.
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Resistance:  DJIA: 28,651; SPX: 3,485; COMP: 11,47111,622; QQQ: 286
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Follow up projection for leading growth stocks:   RISK For A DECLINE POSTED WED: SEPT. 16
My supports held up very nicely, even produced good trading opportunities.
Price: Close 9/16
          Proj. Support       Low       10/7
Facebook (FB: 263)                       251                      244       Close:     264
Amazon (AMZN:3,078)             2,907                    2,871      Close:  3,285
Apple (AAPL: 112)                         103                       103      Close:      117
Netflix: (NFLX: 483)                       437                      466       Close:      538
Google (GOOG: 1,520)              1,451                   1,406       Close:   1,514
Tesla (TSLA: 441)                           377                       407      Close:      433
Microsoft (MSFT: 215)                 191                       196       Close:     215
Key near-term resistance: The news sensitivity of this market complicates picking support and resistance levels – down one day on news, up the next. It looks like we are seeing short covering in the techs, new buying risky. RESISTANCE STARTS: FB:279*; AMZN:3,361; AAPL: 125*; NFLX: 547*; GOOG: 1,547*; TSLA: 461; MSFT: 223*        * Update
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Friday October 9, 2020 (DJIA: 28,425) “Look For a Stimulus Expectation Spike Today”
     With the Biden/Harris lead widening, is fear of a contested election fading ?  Is that why the market is pressing higher ?
Or, is it a stimulus package of $1.85 – $2.0 trillion ?
The latter makes sense, but nothing would surprise me about reversing the will of the people on November 3 and beyond.  Guns have to come off the street. What happened in Michigan  is un-American -That’s what happens in a banana republic.  That’s just one of many reasons Trump has to GO !
      No thinking American wants a lawless country, and that’s where this is headed. If we get there, reversal before unthinkable damage is done, is tough to achieve.
      There are times when politics matter. This is one of them. These are NOT conservatives, I would love to see the conservatives of yore return.
Many have swung over, like George Will, for example.
I think this economy is phony, stock market is phony and administration is phony. Something has to give – let’s start with overvalued stock prices.
BOTTOM LINE:
It helps to step back and examine how you are feeling about the market, not your real “gut,” but where your “fear level” is.  Is it safe to add to positions ?
Today,  my fear level is low, though my gut says be sure to have enough cash and sit close to the exit with  equity positions.
After all, the market snaps back after every correction, a stimulus is a good bet in a presidential election year, what’s there to worry about ?
A low fear level is a signal
to doubt your instincts. I am not sure I am explaining this well enough, we can be an indicator, if we are able to objectively sense our feeling.  Boasting about a great trade is a warning signal, as is jumping into another position immediately after a big score.
Plenty !   That’s the kind of complacency  that can precede a correction –   Getting on the right side of the market isn’t that easy.
BOTTOM LINE:
      Odds favor a spike in prices today or in a couple days followed by a correction. Whether that correction becomes a nasty setback depends on what news hits the market when it is ready for a rebound.
An announcement of another stimulus package could be the spike.
It’s just a little too quiet out there, i.e., just about the time  one thinks it is safe to load up on the latest hype – you find out it was a dumb idea.
We are in a “news whipsaw” now, so decisions based on the latest news is likely to be wrong.
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Resistance:  DJIA: 28,561; SPX: 3,460; COMP: 11,471; QQQ: 283
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Follow up projection for leading growth stocks:   RISK For A DECLINE POSTED WED: SEPT. 16
My supports held up very nicely, even produced good trading opportunities.
Price: Close 9/16
          Proj. Support       Low       10/7
Facebook (FB: 263)                       251                      244       Close:     264
Amazon (AMZN:3,078)             2,907                    2,871      Close:  3,190
Apple (AAPL: 112)                         103                       103      Close:      115
Netflix: (NFLX: 483)                       437                      466       Close:      532
Google (GOOG: 1,520)              1,451                   1,406       Close:   1,465
Tesla (TSLA: 441)                           377                       407      Close:      426
Microsoft (MSFT: 215)                 191                       196       Close:     210
Key near-term resistance: The news sensitivity of this market complicates picking support and resistance levels – down one day on news, up the next.  RESISTANCE STARTS: FB:272*; AMZN:3,197; AAPL: 115.50*; NFLX: 547*; GOOG: 1,513*; TSLA: 428; MSFT: 214*        * Update
This group has been struggling, though failure to extend the correction that started in early September may chase shorts, ergo one more spike.   There could be a quick trade here…..for the nimble, that is.
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Thursday October 8, 2020 (DJIA: 28,303) “Street Not Afraid of Biden/Harris”

The News whipsaw is back !   In short – buying or shorting the news in this market is treacherous, don’t try it.
Insanity – at the top ! after four years of this, I should not be surprised that in the Street is beginning to see a Biden victory as bullish.
Last night’s Harris/Pence debate iced the cake.

MarketWatch’s Mark DeCambre’s subhead yesterday was, “Is the Market Pricing in  a Democrat Sweep ?”
      Yes, it  would likely mean higher taxes for corporations they can handle it, their 40%  tax cut by   the “Tax Cut and Jobs Act” was over the top, especially since individuals only got in the neighborhood of a 1% cut, higher for big earners.
What a Democratic  clean sweep would mean is a return to predictability, the rule of law and  an end to the divisiveness coming down from the top. That alone is bullish.
Besides, the Street and corporate America have already  got what they wanted, a nice extension of Obama’s economic recovery and  bull market.
So a flip flop would make sense, it  just comes as a surprise to me for a Street that has been in the Trump camp for four years.
Like his Democrat predecessor,  Biden would inherit a mess. The rebuild of confidence, international ties, and economy would take time. The hard clean up work would take time, unpopular decisions would have to be made on trade, foreign relations, taxes and paying for infrastructure programs after so much has been spent on propping a failing economy up with stimulus  and  bailouts.
BOTTOM LINE:

Money can be made in late stage bull markets – the fever is up, appetites have been whetted, people are making money and they don’t want the party to end.
Regardless of who wins, a correction/bear market is imminent. They happen, and can come out of nowhere.
It appears the Street is betting on an economy that is totally impervious to a rebound in COVID on top of the onset of the flu season, however, that is drawing to an inside straight.
      A bear market will start when  the BIG money breaks ranks, stops buying and sells in size.
      Up to now, buyers on the dip have been rewarded and will continue to do so  until the dip before the next bear market.
But it really doesn’t seem possible, the market Has rebounded from dozens of corrections, some pretty severe.
A bear market just doesn’t seem possible, does it ?    Well, none of those in the past have either.
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Resistance:  DJIA: 28,487; SPX: 3,438; COMP: 11,438; QQQ: 282
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Follow up projection for leading growth stocks:   RISK For A DECLINE POSTED WED: SEPT. 16
My supports held up very nicely, even produced good trading opportunities.
Price: Close 9/16
          Proj. Support       Low       10/7
Facebook (FB: 263)                       251                      244       Close:     258
Amazon (AMZN:3,078)             2,907                    2,871      Close:  3,225
Apple (AAPL: 112)                         103                       103      Close:      115
Netflix: (NFLX: 483)                       437                      466       Close:      535
Google (GOOG: 1,520)              1,451                   1,406       Close:   1,460
Tesla (TSLA: 441)                           377                       407      Close:      425
Microsoft (MSFT: 215)                 191                       196       Close:     209
Key near-term resistance: The news sensitivity of this market complicates picking support and resistance levels – down one day on news, up the next.  RESISTANCE STARTS: FB:259*; AMZN:3,215; AAPL: 116*; NFLX: 540*; GOOG: 1,470*; TSLA: 429; MSFT: 209*        * Update
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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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