Thread: Rod's Account Talk

Interesting outlook for the coming months...

Headline: (Dated: April 17, 2020, 11:41 AM CDT)

"Guggenheim’s Scott Minerd Sees Chance of S&P Falling as Low as 1,200"

Scott Minerd, the chief investment officer of Guggenheim Investments, said gains in the S&P 500 are unsustainable and the stock benchmark could fall as low as 1,200 when it retreats.

“Investors who are sitting out there right now who rebalanced a few weeks ago and moved from fixed income to equities should probably think about rebalancing again,” he said Friday on a panel. “It could be 1,500, 1,600, 1,200.”

The S&P 500 stood at 2,843 at 12:17 p.m. Friday in New York, down about 12% this year. Minerd’s opinion diverges from the views at Goldman Sachs Group Inc. and of Morgan Stanley Chief Executive Officer James Gorman.

Gorman said it’s unlikely that the market hits new lows. He sees the S&P 500 at 2,850 in the near term, then heading lower, he said on the panel hosted by the United Nations Office for Partnerships and the nonprofit Goal 17.

“The market at this level based upon where earnings are doesn’t represent any kind of intrinsic value,” Minerd said. “It is being entirely propped up by liquidity.”

The Guggenheim investor said there could be rolling shutdowns for the next two years, preventing a full-scale return to work, and that U.S. unemployment could reach as high as 17%. More than 20 million jobs have been lost in the last four weeks.

“It’s going to be a long haul to get back to the unemployment levels we saw prior to the downturn,” Minerd said. “That’s why I’m so concerned about a longer-term plan to encourage business to get people back to work.”

Source:

https://www.bloomberg.com/news/artic...s-low-as-1-200

I enjoy watching TA (Technical Analysis) videos on the current market action. But, it seems that the Fed's overreach is proving TA to be a futile endeavor... at this time. The playing field simply isn't level. If it wasn't for the Fed, we would have certainly retested the 23 Mar lows by now. And perhaps we would now be above them without the Fed's propping up. We'll never know for sure, though. But, one thing we do know for certain is that the Fed has Mr. Market rigged. As I've said in an earlier post, the Fed certainly has an Achilles heel. Perhaps it will come to fruition in the coming months as thee global economic shock truly sets in. One that the Fed itself likely won't be able to mitigate. In the meantime, be careful out there. And don't think that the worst is over. It has yet to begin. You'll see for yourself in the coming months.

And to my point...

Subject:

The Fed may have fundamentally altered the nature of risk in the stock market

At the lows on March 23, the S&P 500 was off roughly 34% from its highs. From those lows it’s now up more than 27% through the close on Tuesday.

This is confusing to many investors for a number of reasons:

The economy is still effectively shut down for the foreseeable future.

The unemployment numbers continue to worsen as jobless claims in the past 3 weeks are more than 16 million people (a full 10% of the labor force).

Even though social-distancing seems to be helping, it appears the coronavirus will be with us for some time.

No one has a clue how this is going to work when we try to turn the economy back on again.

Here's the big question: If the stock market during the worst economic contraction in 90 years can be smoothed out by government spending and Fed actions, does this change the risk-return framework in the stock market going forward?

Said another way — if stocks are now safer, and no longer carry the risk of a Great Depression-like crash, the fundamental risk vs. reward equation has been altered. And if there's less risk, does that mean expected returns will be lower going forward?

Read entire article:

https://www.msn.com/en-us/money/savi...et/ar-BB12NdAY

The Fed is just rolling the dice like the rest of us and whether they win or not depends on folks going back to work sooner, rather than later. Right now, potential momentum is still in their favor, and they seem to be convinced that if we can restart work in earnest, that there will be a rush back to the top and none of the negatives that are bound to unfold in the coming months will matter. We've seen it playing out in the short-term already with this bear market rally.

But, I see merit in the article you posted. Risk may be shifted or deferred, but if the virus isn't brought under control, then the Fed fails. It's still all about the virus. The Feds plan hinges on either control of it or the realization that we can go back to being productive in spite of it. If the American people can be convinced of either, the Fed wins. The media is going to try and convince us that doom lies ahead.

Originally Posted by rangerray

The Fed is just rolling the dice like the rest of us and whether they win or not depends on folks going back to work sooner, rather than later. Right now, potential momentum is still in their favor, and they seem to be convinced that if we can restart work in earnest, that there will be a rush back to the top and none of the negatives that are bound to unfold in the coming months will matter. We've seen it playing out in the short-term already with this bear market rally.

But, I see merit in the article you posted. Risk may be shifted or deferred, but if the virus isn't brought under control, then the Fed fails. It's still all about the virus. The Feds plan hinges on either control of it or the realization that we can go back to being productive in spite of it. If the American people can be convinced of either, the Fed wins. The media is going to try and convince us that doom lies ahead.

Even Twinkies, an American institution, were out of production for ten months and that was in good times.

Strange times lie ahead no matter what the left or right media is reporting.

Originally Posted by Rod

Day 1 above the 50-EMA...

Day 2 = above still on the S&P? Is that the one you are watching?

Originally Posted by Happy_Trails

Day 2 = failure. So, I assume you will restart the count when we get another close above the 50 EMA?

No, not a failure. The 50-EMA is 2811.95. It remained above it all day. Maybe you are thinking of the DMA... which would be a failure. But, I am concerned about that last, weak candle.

Originally Posted by Rod

No, not a failure. The 50-EMA is 2811.95. It remained above it all day. Maybe you are thinking of the DMA... which would be a failure. But, I am concerned about that last, weak candle.

When I first posted, I was looking at SMA then noticed you are watching EMA. It did close below the 50 day SMA.

Although this is Day 2 above the S&P 500's 50-EMA, it is not on strength, but rather weakness. Because of the historic collapse of oil into negative territory, If I were to exercise the 3-5 confirmation rule, I would likely exercise it on the 5-day rather than the 3-day. Furthermore, I also have to see Mr. Market flex his muscles. Just because the S&P 500 remains above the 50-EMA is not reason enough to make an IFT. It needs to be on increasing strength/volume, and not on a trend of declining weakness/volume.

Reminder, the S&P 500's 50-EMA changes daily. It is currently at 2811.95.

God Bless

Originally Posted by Rod

Although this is Day 2 above the S&P 500's 50-EMA, it is not on strength, but rather weakness. Because of the historic collapse of oil into negative territory, If I were to exercise the 3-5 confirmation rule, I would likely exercise it on the 5-day rather than the 3-day. Furthermore, I also have to see Mr. Market flex his muscles. Just because the S&P 500 remains above the 50-EMA is not reason enough to make an IFT. It needs to be on increasing strength/volume, and not on a trend of declining weakness/volume.

Reminder, the S&P 500's 50-EMA changes daily. It is currently at 2811.95.

God Bless

If futures are any indication, the 50 EMA will be under pressure tomorrow.

Is Pivot Point still calling for testing the lows? Didn't see the most recent.