Wall Street Next Week: Financial astrology for the successful investor & trade

1. Stock market looks like ‘hapless Wile E. Coyote, running off the edge of a cliff,’ says behavioral economist

Market risk is HIGHLY elevated this August: We believe the question will no longer be: “How high is UP?” but will become “how low and for how long?” This coming week is likely to be transitional & therefore highly volatile. While buying on dips may  work at times for day traders, it will NO LONGER automatically be profitable for position traders.

Of course being short, also has it risks: fiscal stimulus plans, vaccine data, US/China relations, & the elephant in the room, the U.S. election.

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While we anticipate a faster recovery than in the past, it will NOT a super charged V.

We see a U [or “skinny U”] US economic recovery but stock markets NOT V, L or U but W. 

Q4 US GDP will highly depend on US election outcome.

RECOMMENDATION: 100% Protection until September.

First Trading Targets V1.5: SPX 3093  NASDAQ 10,156

OUR VIEWS:

1. We have a short bias given elevated market risk now until late Summer. 
2. POST SUMMER INVESTMENTS SHOULD BE TARGETED FOR A POST COVID-19 WORLD:

for a “Recovery” rather than “Quarantine” portfolio.

TRADERS SHOULD DAY TRADE OR HAVE VERY DEEP POCKETS;

1. Elevated Volatility = After hard rallies or market drops, it is smart to book profits.
2. Watch +/- DJIA 27,800 NAS 11,146
3. This week by/circa August 19 is potentially pivotal 

INVESTORS REQUIRE A LONGER TERM HORIZON THAN NORMAL.

We are no longer holding but recommending selling or placing profit stops for many stay-at-home/Covid stocks e.g. PZZA that have been winners from this crisis. We will be planning a different strategy for the post November US Presidential Election.

Conservative investors may prefer Water Utilities, TIPs or high quality corporate bonds and dividend-paying stocks.  Precious metals will continue to shine. Aggressive investors will wait and watch to pounce on misunderstood wounded winners.

AT THE RIGHT PRICE, AND RIGHT TIME FRAME, THE COVID CRISIS REPRESENTS DANGER & OPPORTUNITY.

Commodity Trading:

Gold + Fall Astro, ++ Astro Nov/Dec  Rebuy late Summer Current Trading Range $1800-2200

Silver Astro is generally positive  $22 Support $25-26 Pivot R1 28 R2 30

Copper 2.80 PIVOT 3 RESISTANCE

TRADING: Our approach is to enter early and exit early, medium risk with lots of profit none-the-less.

We have a short basis for August: SPX RISK 3400 SPX REWARD 3100-

Trading Shorts July 31: DJ 26,377  SPX 3271  NAS 10745

First Trading Target V1.5:  SPX 3093  NASDAQ 10,156

The Following prices are comfortable INVESTING accumulation zones for us if/when next seen (late Summer?):

1. DJIA 23750-24800  
1. NASDAQ 8000-8500
2. SP 2700-2825

2. This coming week is expected to not only be often Volatile but likely a market pivot.  We are making a list of stocks to buy AFTER a correction

 

Favorite H2 2020 Sectors:

Entertainment, Mining, Safety & Security & Technology (Undervalued & Highly Scalable)

Short term we are downgrading technology for the forecast August correction e.g. republicans-serious-big-tech-antitrust and/or China issues.

Intermediate term we are downgrading Select Health Care (lower cost/better outcome) due to potential future political risk e.g. Trump signs orders to lower prescription drug prices. However, longer Term, global heavy weights like JNJ and PFE will be safe and profitable harbors.

Stock selection is important. When possible, we prefer to recommend stocks sporting strong cash flows, sound balance sheets & growing dividends.

Choose your favorite stocks and patiently bid for them at near ideal prices if/when seen again [August?].

 

3. Why gold price, silver price fell so sharply

HW: If you are right that gold reaches $1660 (circa Fair Value), I will be happy, happy aggressive buyer. While anything is possible, I am not holding my breath.

 

“Technically, the gold bulls have the strong overall near-term technical advantage….resistance for gold in the near term may be around $2,100.

Bears’ next near-term downside price objective is pushing futures prices below solid technical support at $2,000.00.” 

Jim Wyckoff, senior analyst, Kitco.com

HW: $1900 is now currently the new technical support level for Gold.  Despite being overvalued,  given it’s extremely strong astro this Fall (anticipated by markets?), owning gold is VERY likely to well reward investors at 2020 Year end.

Given newbie gold investors have little knowledge of the industry and many are accustomed to Tech valuations, is there an upper limit to Gold or Silver pricing? Maybe not! In the meantime, Gold is in an 1800-2200 trading range.

Silver $22 resistance is now support with P3 30 next resistance level. 

There are so many good buys in the precious metal space depending on your time frame and risk/reward desires. Here the trend is MOST definitely your friend.

Review past WSNW and AFUND luncheons & conferences for many good ideas that can be quite profitable this coming Fall/Winter. Also upcoming

 

   

Copper previously was undervalued largely as a pawn of the US/China trade spat & Wuhan Virus.

Now along with most other commodities, intermediate and longer term it sports favorable fundamentals.

 

Gold: Fundamentally there was a short term decrease in mine supply coupled with GREATLY increasing investor interest. Please note gold is under Highly favorable astrological influences late Q3 & Q4.

Longtime Gold bugs are happy that more generalist investors are beginning to join the party:

In addition, many major brokerage houses had $2000+  price targets into 2021.

These views are already validated, and more, if/when inflation fears resurface and/or if/with a falling US dollar!

We believe gold & silver valuations will largely sport well above Fair Value in this Year of the White Metal Rat (2020).

Just as they were undervalued for a long time, it CAN and is likely to be overvalued for a LONG time.

While fundamentally gold is currently overvalued, in much of the Fall & Winter, the astro is very positive for gold.

Hence we recommend a full and over weighted precious metals portfolio allocation.

However, we advise precious metal investors to also pay attention to stock selection.

1. Gold remains cheap geopolitical crisis insurance.
2. For investors who cannot or will not buy the $US currency as well as investors who wish to safely and cheaply hedge their US$ exposure, ONLY GOLD IS AS GOOD AS GOLD!
3.  Once again some investors are hedging record equity prices by buying gold. . 
4. Ultra-low global bond yields makes gold an attractive alternative risk mitigation hedge.

Gold FV $1653= Commodity FV: 1591 + Currency FV: 1650 + Inflation Metal FV: 1558 + Crisis FV: 1813.

INVESTORS: We plan to stay LONG in H2 2020 with occasional hedging, selling or profit taking before the Fall.

Note: Our current Fair Value for Silver is ~$20. 

 

4. “So, despite rising political tensions between the US and China, the prospect of an anti-business government in the US, and a rebound in virus cases, it appears likely that a vaccine could rescue markets and keep the equity bull trend intact.”

Steven Bell, chief economist, BMO Global Asset Management

HW: If one ignores the economic consequences into 2021 and damage already done.

 

“This is not rocket science, folks. When you pay people more to sit at home than to go back to work, they sit at home. When you don’t, if they are offered a job, they go back to work.” 

Stephen Stanley, chief economist, Amherst Pierpont Securities

HW: Next you would have us believe 2 + 2 +4.

 

“The good news may be bad news now because that gives a little more uncertainty about the need for stimulus.”

Chris Gaffney, president of world markets, TIAA Bank

HW: Investing today is a bit like Alice in Wonderland.

5. Inflation Is Coming, and Big Tech Won't Protect You

 

6. READER: Markets seem to be defying the bearish forecast for August. Even small caps are responding abnormally. Maybe astro only works with carbon based lifeforms, not silicon based.

HW: Algorithms don’t get worried or scared by big news events the way humans do. We still maintain August will close lower than it started!

READER: Hope you’re right. It’s what I’m betting on.

HW: While they say “Hope” is the enemy of traders, it is also my “hope” and bet!