Ticker tape by TradingView

7/19/2021

US markets tumble nearly 2% with the dollar as investors fear the delta strain and inflation factors. COVID cases are now averaging 30,000 today in the US as 14-Day case change is up 140%. Meanwhile, bonds extend losses to 1.19%. Banks and tech stocks are getting hit hard today as money is shifting toward the bond market.

Our outlook

Further downside did come for the markets as well as the USD. Fears are high right now, and indices are selling off. Although this is very worrisome and people are afraid of another shutdown in the US, the circumstances are different from last year.

For one, we now have vaccines. About 50% of the US is vaccinated while Americans continue to flood the job market. Vaccines aren't going to guarantee that you won't get sick, but the antibodies your body builds up with the vaccine should help offset a lot of the illness or even prevent it entirely.

Secondly, many businesses changed their working model to accommodate the stay-at-home lifestyle that was pushed on citizens nationwide. So, unlike last year, we already have the necessities prepared for another shutdown where layoffs may be lessened and economic productivity doesn't have to come to a screeching halt. This also could mean that tech stocks will be the first sector investors look to during economic fears.

Trade Setups

SPX500

Here is the SPX500 in the 1D chart which is down 1.47% at the time of writing this. Price has come down all the way to major support on its 50-day moving average which is showing some positive momentum after that bounce. If price can maintain above the moving average today, it could suggest that investors are ready to go long again.

NAS100

Massive buying in the tech sector on this latest 4H candle as price action shows big rejection from the low with a candle hammer formation. Further support is at its 200 SMA on this timeframe for mild support. Price is not testing newly formed resistance now as it made a lower low.

IWM

The Russel 2000 ETF that tracks growth stocks came down to a multi-month bottom before bouncing right back this morning. Price also got real close to its 200 DMA on the 1D timeframe which could serve as support if price comes back down. However, this looks like the bounce is already happening.

Throughout the year, we've seen many changes to the way we trade, how we manage risk and how we interpret the markets. The new insights we have gained over the months usually come after years of trading and adapting to ever-changing environments. We've done all that in a matter of months! Up until the New Year, we will see even more changes to the way we trade as news about stimulus, BREXIT, COVID-19 and other things storm the market and dominate the news. With all this in mind, from what we currently know, here are some things that we think will be top tier for trading/investing in the markets, forex, metals and crypto from here and into the next year.

Because we're looking for ideas that stay relevant in the longer term (as in 2020 and 2021), these ideas/setups are going to be more fundamentally based rather than short-term technical setups.

EUR/AUD

EUR/AUD daily chart

This pair has proven to be very volatile during times of economic fallout. That spike we see starting in late February kept bringing up new highs for a massive gain once the rally was over. With the news about the UK and their emergency from the new COVID strain, we could see heavy volatility from here on as a new strain could be bad news for our most recent vaccines. One thing we can take from a trade like is momentum. If governments start announcing further shut downs worldwide, expect this pair to take flight once more.

Biden's Goals for Solar Power and Cannabis

As of January 2021, the Biden Administration plans to decriminalize marijuana as well as help introduce more solar panels as they push to end the era of fossil fuels. Experts in the clean energy field have established that solar power is now less costly than fossil fuel plants. Companies like SolarEdge (SEDG) and Sunrun (RUN) could see some long term growth in the next 4 years.

Cannabis is also something to look out for during Biden's presidency. With the MORE Act already passing through Congress which aims to decriminalize pot, it's up to the Senate to push it through although it is considered unlikely. Nevertheless, more bills continue to swing into view such as the STATES Act. This bill will help companies in their profits by giving them tax breaks since they pay sky-high amounts as of now. Although these bills are not guaranteed to pass, this shows that the government is pushing toward more leniency on this industry and will likely reach some sort of conclusion with the help of Biden's push for legalization.

Gold

XAU/USD 4H chart

Gold will also have a big role to play in the coming months as well as into 2021. As you probably know, gold is a risk-off investment and usually performs well when the USD suffers. This year, stimulus brought about some extreme printing of money pouring into the US economy. This in turn, hurt the USD causing the XAU/USD pair to skyrocket in the summer.

With the new COVID strain out in the UK, there are some things we need to consider: what does this mean for our vaccine? And will countries have to shut down once more? If this strain of the virus becomes another global situation, it is likely that our country will have to repeat the same process back in February and March. A country-wide shut down will only hurt recovering businesses more, and stimulus will be needed to be pumped back into the economy. If the future were to play out like this, the USD will only be further weakened as gold will rise in demand. Analysts also believe in a $2000 price target for this metal.

Crypto

Similarly to gold, cryptos will likely see a rise in demand if the USD falls. More analysts, hedge funds and banks are starting to recognize this type of currency transaction as the way of the future after being so bearish on them for the past three years.

Bitcoin had a key thing happen with Grayscale Bitcoin Trust increased their asset in Bitcoin to over $13 billion from $1 billion last year. We are also starting to see more funds get into this crypto like Massachusetts Mutual Life Insurance Co. who bought about $100 million to add to their portfolio.

Another crypto to look out for going into 2021 is the meme currency, dogecoin. After Musk's latest tweet about doge, the pair soared 20% reaching highs from July. Elon Musk is clearly joking when he talks about dogecoin, yet his words still bring traction to the market. In an effort for investors to raise it over $1, investors don't need valuation to justify a ridiculous price; they just need the hype.

-

One thing we could take away from this year is that with hype comes momentum, and it's usually a good bit of it. We saw the way EUR/AUD took off at the beginning of the government shut downs. We saw global stocks rise to all-time highs after the Fed announced their stimulus package. Gold hit record highs as well, all from momentum. The circumstances change, but the idea is always the same. If we can look passed the fact some things may seem worthless (like Bitcoin in 2017, like Tesla in 2019), we can be in for some very profitable trades in the New Year. It all comes down to momentum.


Disclaimer:

Please note that this email is my personal opinion only. I am not a licensed financial advisor, and any information shared or discussed is not to be construed as investment advice. Trading and investing involves a degree of risk, and is not suitable to all investors. Please consult with your financial advisor before making any sort of investment decisions.

Featured Pic: https://www.gosolarcoach.com/wp-content/uploads/2018/07/Weed_PV-1080x628.jpg

After the steepest drop in US equities in history back in February, the stock market rebounded 63% and passed all-time highs from pre-crash levels. With an economy that was once booming turned into a recession, but the market did not seem to care from the belief that the Fed would keep money flowing in and the banks, during a period of almost 0% interest rates, had nowhere to put their money except in the stock market. Led by tech, the market climbed higher than ever before. USD pairs got crushed as GU and EU skyrocketed. Although the S&P has already dipped over 6% in the past week, it seems that the time to buy is not that attractive to investors. Here are some reasons why:

Illusion of the Fed

The Fed, with seemingly unprecedented power to fuel the equities market, made investors feel backed by the central bank to where the market had nowhere to go but up. There was an illusion that the Fed would never let stocks dip whatsoever, but that can only go so far. Fueling the market means printing money, which means increasing debt and inflation. If interest rates rise, the market will tumble as well, so interest rates need to stay low while the USD deals with inflation rising. Keep in mind that interest rates were already very low to begin with as Trump promised the best market we have ever seen. Once corona hit, interest rates only had so far it could go before it reaches 0% or negative. Yes, it is true that missing this most recent bull run killed bearish sentiment, but the bears aren't going to sleep forever. The Fed won't keep printing money forever, and at some point, it is not up to them where the market decides to go.

GET $5 OFF OUR VIP GROUP!

  • See trades taken by our analysts
  • Join our chatrooms
  • Access our strategy library
  • USE CODE 'FVIP1' to get $5 OFF!

The lack of new stimulus

Millions of Americans are still out of work, even more so than the great financial crisis of 2008. The unemployment numbers have been greater than 2008 for over 6 months now, and companies are still having lay-offs. Initial jobless claims data shows that the economy is not really recovering. We finally dipped below 1 million a few weeks ago, but the number each week has now been hovering in the 800,000s. The damage done is irreversible, and will take a long time to recover. Some analysts expect 8-10 years to be fully recovered. However, this will not necessarily affect the stock market and major pairs as much. The fact that Americans have been out of stimulus payments since early August shows the true colors of Congress as Democrats and Republicans continue to debate over which package is best. Now is not the time to push agendas or make Capital Hill look bad. It's time to put differences aside and help the people that need it.

Vaccine Drawbacks

News on vaccine has definitely been a major driver in the market's direction this year, but failures in the trials have brought fear back in to the minds of investors. After one patient in a voluntary vaccine trial came down with an unknown illness, the market freaked out and dipped hard with big tech leading the drop. The first step in this biological crisis is to find either a vaccine or efficient treatments to the virus and stabilize the number of cases. The number is still rising now that schools and universities are calling students back to campuses. The University of Georgia made business news when cases spiked over 1,400 positive tests. Sports teams are postponing games, some teams are not playing at all, and billions of dollars in revenue could be lost if cancellations continue.

What will tomorrow bring?

Tomorrow and next week will be interesting. Last week had moments of short-term uptrends forming before price got wiped out again. This pattern happened a lot last week. The bulls are losing momentum with all this crazy news coming out, and tomorrow may be grim. The market is following the same pattern from February: sell offs begin to bring price down before that big correction happened of -34% on the SPX500.

You can tell that the dips are becoming successfully more aggressive the higher we climb. The red candles are now overpowering the green and this recent dip has already wiped out 3 weeks of gains. The healthy thing would be for the market to correct making stock prices and value reach closer to equilibrium. Otherwise, we will see a bull market run completely by FOMO investors who want to make a quick buck on each swing up, and an inevitable correction farther in the future will be worse than if it were to do so now. Since the market has dipped back into correction territory, it's time for it to make a decision. Will we continue to buy in to the Fed-fueled rally, or will we let the market healthily correct so that it makes more sense to start investing again?
We will find out soon.


Disclaimer:

Please note that this email is my personal opinion only. I am not a licensed financial advisor, and any information shared or discussed is not to be construed as investment advice. Trading and investing involves a degree of risk, and is not suitable to all investors. Please consult with your financial advisor before making any sort of investment decisions.

Featured Pic: https://static.bangkokpost.com/media/content/dcx/2020/05/16/3633836.jpg

Gores Metropoulos Inc. (NASDAQ: GMHI) has marked a deal with global leader in artificial intelligence on highway autonomy, Luminar, and is going public on this merger worth over $3 billion.

A little about Luminar Tech

Luminar works in the field of highway safety using various AI tools for detection of objects up close or even from a considerable distance. One of their products, the Iris, can detect objects from a max distance of 500 meters away.

https://www.luminartech.com/

Just from clicking on the website, you can get an idea of the kind of technology that Luminar is working with without the use of many words. The front page is an interactive picture of a city street that the users can look around with. Immediately, the site can not only grab the users attention, but expose the advanced technology without explaining it in depth.

The company is well-established in the private sector with 50 partnerships including several of the top Original Equipment Manufactures in the world.

GMHI

Gore's most recent earnings report came as a surprise to a lot of investors in a good way. On top of that, the size of this merger is a little bigger than Nikola's merger with VTIQ earlier this summer. This might be a good sign to traders now that the market cap sits at a little over $1 billion. The new valuation of $3.4 billion might drive the price up. Luminar will receive an immediate $170 million in finance as the ticker will change from GMHI to LAZR on the Nasdaq. The deal is expected to close at some point in the 4th quarter.

GMHI on the 1D chart. For those who are trying to trade this pre-merger, support can be found in the 10.70-80s price range. Price hasn't been able to break above the $12 mark yet, so a potential retest could happen come merging time. 14-Day RSI stands little under 60.

I am currently holding a position on this stock, however it is small. Remember that anything can happen in these unpredictable markets, especially the SPACs, so it's important to keep a level head and risk what you are willing to risk.


Disclaimer:

Please note that this email is my personal opinion only. I am not a licensed financial advisor, and any information shared or discussed is not to be construed as investment advice. Trading and investing involves a degree of risk, and is not suitable to all investors. Please consult with your financial advisor before making any sort of investment decisions.

Featured Pic: https://www.google.com/url?sa=i&url=https%3A%2F%2Fwww.spar3d.com%2Fnews%2Flidar%2Fluminar-lidar-starts-production-scale%2F&psig=AOvVaw0jaPPo4zhsonE67L7aDxZ4&ust=1598902576854000&source=images&cd=vfe&ved=0CAIQjRxqFwoTCMi0l7rWw-sCFQAAAAAdAAAAABAD

Politics preventing new financial stimulus

The economic recovery in the major global economic powers depends on several important factors. One of the most vital part, the spread of the virus and the government's answers to it. With a decrease in daily cases of COVID-19 to 50,000 in the U.S.A. Yet U.S. A remains the most significant global threat being the largest economy in the world. The trend of the virus in Europe has begun to worsen. With the majority of countries experiencing an increase in the past weeks.

The economic impact of global shutdowns, although severe, was cushioned by massive government aid and hawkish monetary responses everywhere. The U.S., after a slow start, introduced the most aggressive fiscal response in the form of its $3 trillion CARES Act. This funnelled cash to businesses and workers impacted by the pandemic and got forced into lockdown. 

Want to see our trades live?

Join our premium trading community to:

  • See our top trade alerts from our analysts
  • Access our VIP chatrooms with traders worldwide
  • Access our training material exclusive to members
  • Exclusive access to articles

It had a significant impact on consumers, in particular despite a 10% reduction in salaries of employees in April. Due to substantial job losses, individual incomes in the U.S. A grew by approximately 10% due to a doubling of government funding. This mainly came through further unemployment assistance that entitled people to an additional $600 a week in aid. Despite this surge in government support, the household savings ratio increased to over 30% in contrast to an average savings rate of just 7%. Only to fall falling to 19% in June. However, there are critical factors here that contribute to the falling of savings rate: Those in the higher-income brackets, who would be less likely to have been affected, have seen savings spike. Those who were more likely to have needed the additional unemployment aid had a higher inclination to consume their stimulus cheque on necessities. Consumer spending is vital to any economy, especially in the U.S.A., which accounts for the vast majority of U.S. A GDP, is therefore vulnerable to the suspension of this stimulus cheque. 

These payments have been stopped at the end of July, and although President Trump has authorised a temporary (reduced) cost, there is no certainty about the policy beyond the end of this month. This is due to the ongoing conflicts between Republicans and Democrats on the next stimulus package. Democrats initially intended a package worth $3 trillion, with Republicans at $1 trillion. It appears that significant steps forward have been made towards a new stimulus package, but notable differences among them still remain. 

Given the fast-approaching nature of the election, it is unlikely that legislators on either side want to be criticised for another spending slip and citizen unease. That is why I still think a deal will be completed. Given the ongoing excitement within equity markets, it is likely that the market is also anticipating a deal to be done. 

Draghi returns  with Advice for policy maker

Former E.C.B. president Mario Draghi sent the current policymakers some critical advice about how best to control this financial crisis. His advice is really deserving of notice.

The speech is jumbled with historical quotations, such as to the wars, the global financial crisis of 2008 and the euro sovereign crisis of 2010, but we take away a few crucial bits of advice that are relevant to how policymakers may deal with today's obstacle. 

  1. This crisis is something modern policymakers have not yet seen so needs flexible thinking and innovative solution. The urgency and severity of the economic downturn caused by the pandemic that sticking rigidly to conventional views of monetary and fiscal policy risks worsening and lengthening the downturn the world is in. Policymakers in this crisis have shown to be realistic in introducing economic and fiscal assistance which we have never seen before. These actions have cushioned the fall for employees and corporations. For this efficient response to the global recession, they earned our respects. In European circumstances, it was feared that monetary rules would hurt governments from making these kinds of decisions. However, the European Commission has shown a sensible approach in waiving the rules for 2020 and possibly, for 2021. With blended resources also expected to be used for the first time, the union shown in the alliance of nations is a welcome and surprising characteristic of this mess.  
  2. There is what we can call "good" debt and "bad" debt. The significant increase in government debt levels due to crisis-related expenditure is sustainable, but only IF the funds are set towards productive uses. The actions of the E.C.B. have facilitated this. But it is not a cure. In the first instance, Draghi advises legislatures to protect the vulnerable to ensure social union. We have seen social division rise during this time, also causing major unrest. However, resources must be put to productive use and not wasted. In consequence of World War II, this took the form of a reconstruction of physical infrastructure throughout Europe. This time around, Mario Draghi advises that the investment should take the form of large-scale investment in human capital. Education is seen as a crucial part of the growth in productivity and economic growth. If economies are to prosper and the debt is to be paid back in the future, governments must have a revived focus on growing the productive potential of their economies. 

Want to see our trades live?

Join our premium trading community to:

  • See our top trade alerts from our analysts
  • Access our VIP chatrooms with traders worldwide
  • Access our training material exclusive to members
  • Exclusive access to articles

Warren Buffett, one of the most successful and richest investors of all time, long-time owner of the established conglomerate, Berkshire Hathaway, and mega bull has recently turned bearish on the US stock market. Granted, he has been saying this since the April rebound, but he finally put his money into action.

Although Buffett would probably never short the market, he decided to get rid of his bank stocks by dumping JP Morgan, Wells Fargo, Goldman Sachs and other banks with smaller positions. He sold over 250 million shares, hundreds of billions of dollars worth in total, but that's not all.

https://www.cnbc.com/berkshire-hathaway-portfolio/

The oracle of Omaha had also replaced his stake in bank stocks for a gold mining company, Barrick Gold Corp (NYSE: GOLD).
But why sell bank stocks when the Fed has funded them with trillions of dollars and pushing the S&P passed all-time highs?

Surprisingly enough, bank stocks have largely under performed the market in this latest bull rally. This is due issues regarding credit and debt; Analysts expect banks to be close to $900 billion in losses by 2022, according to CCN.

https://www.advisorperspectives.com/dshort/updates/2020/08/04/market-cap-to-gdp-an-updated-look-at-the-buffett-valuation-indicator

Here's the indicator Buffett uses to measure the Wilshire Stock index valuation compared to overall GDP. The way it's measured on this site (which is the accurate way) is by taking the annual GDP from Q1 and using that as the denominator throughout the year. So, it is basically the index divided by Q1 GDP.

In most recent numbers, GuruFocus has us at 179%, which they consider 'significantly overvalued' for the market. They also predict a 2.9% decline in stock market returns this year.

https://www.gurufocus.com/stock-market-valuations.php

What Now?

It's hard to predict what is going to happen in the market with tons of factors at play. For example, two weeks ago, jobless claims dropped into the 900,000s range, and investors believed the economy was recovering. The market shot up. Last week, jobless claims (which have been driving the market either up or down) reported back over 1 million at 1.1 million. Despite bad news, the market shot up harder than the previous weeks.

The problem investors are running into is that Wall Street will tell you that the economy doesn't reflect the stock market. And when there's bad news about the economy, the market tends to go up. However, when there's good news about the economy, that news matters all of the sudden, and it causes a buying frenzy. As an investor who's got most of their money sitting on the sidelines since April, it's frustrating to try to get an idea of when is the best time to buy. Do we brush off the fact that the US is in a recession? Do we join the hype train and ride with the bulls?

The answer is painfully simple: Bull and bear markets all come to an end eventually before it resets. Look past the trees and view the whole forest. Is a vaccine going to fix the damage already caused by the pandemic? Most stocks on the S&P 500 are showing negative returns expect for a certain few. There is lasting damage to the economy, and if you were forward-looking, it would make sense to see the market reflect that in stocks. Some analysts are talking years of rebuilding before the economy 'normalizes' again.

Here is the US30 on the 4H chart showing long wicks on both the tops and bottoms of several candles. That is a big sign of uncertainty where investors can't decide on what to do. No one really knows what is about to happen in the next week, month or year, not even Buffett himself. It's about being rational and understanding what makes sense in the long run.

Put yourself in an unbiased position and ask, 'should the S&P really be at all time highs right now?' The obvious answer should be no, but again, the market does not always make sense.

What to Look Out For This Week

Watch for vaccine news: This week may see another frenzy of buyers as a successful breakthrough on treatments to the coronavirus will most likely become approved by medical officials.

Watch Big Tech: The stocks like Amazon, Apple, Google, etc have been the main drivers of the market. Analysts are finding long entries on all of these companies excluding Netflix.. Traders are likely to follow.

Watch Technicals: This is definitely a trader's market now. News does affect price, especially good news, but indices are respecting lines of support, resistance, breakouts, wedges, etc. On the 4H chart, the US30 broke above the wedge with a strong green candle. A break in highs could mean that the SPX500 might want to continue its run for now.


Disclaimer:

Please note that this email is my personal opinion only. I am not a licensed financial advisor, and any information shared or discussed is not to be construed as investment advice. Trading and investing involves a degree of risk, and is not suitable to all investors. Please consult with your financial advisor before making any sort of investment decisions.

Featured Pic: https://news.theceomagazine.com/wp-content/uploads/2020/02/warren-buffett.jpg

At 8:30 am EST, the Bureau of Labor Statistics released US unemployment rate and the number of jobs added in the month of July. The results were better-than-expected, but was it good news?

https://www.bls.gov/charts/employment-situation/civilian-unemployment-rate.htm

Total unemployment rate came down to 10.2% after economists predicted a rate of 10.5%. The number of jobs expected to increase this month were around 1.6 million, and reports came out that around 1.8 million were added.

This could be taken two ways:
Investors see that the economy is slowly recovering, as recoveries don't happen immediately. At least we are starting to see some improvement.

The other way could be taken like this: The amount of growth we saw in the last two months provided much more promising numbers that it makes this month's report look like a joke.

In the month of May, the US was able to gain 2.5 million individuals to the payroll. June gave us 4.8 million says Washington Post. Two months of progress started looking promising, but July gave us a number less than May and June. With 1.8 million more employed shows that we have seen a slow-down in economic progress.

GBPUSD 4H Chart

During the market's dip this morning, we saw some movement on major pairs like GBP/USD and EUR/USD to the downside. Starting in early afternoon, the stock market began to recover, and those pairs followed.

We started seeing some decoupling of certain pairs from the market, but today's behavior did not reflect that.

Although unemployment rate has come down to 10.2% from 14%, there are still many concerns over how long it will take to reach a full recovery. The US has a long way to go from the decent 3.5% unemployment we saw in April. If not for the Fed, US markets would be down well below highs in late February. Washington Post also added that the Congressional Budget Office mentioned that the US will not see a full recovery for another 10 years. If that does not provide gloomy sentiment for stock investors, I don't know what does.

What to look out for

Last month has definitely showed that the US is not doing as great as they thought. With this earnings week coming to an end and this month's jobs data out, it's time to do some forward thinking. Because the market always looks to the future, next month's results should be considered. Any type of good news tends to be more effective than bad news. Jim Cramer, on CNBC, recently talked about how the market can be stupidly bullish sometimes, and the latest rally came out of nowhere. If the number of jobs increase by even a little bit for August, that's more than enough reason for retail traders and big banks to invest.

The US30 seems to have entered an area of consolidation between 27184 and 27625. This area is something to watch as lawmakers continue to delay new stimulus measures. Our overall sentiment on US markets is still bearish, but being bearish and calling bearish moves are two very different things. In other words, knowing that the market is due for a correction is different from calling it. The market is definitely overbought, but the question is how overbought? We will be looking to a break in that consolidation zone to the downside. If price comes up to that top at 27625, we will look for a short sell limit as well.


Thanks for reading! If you are interested in joining our trading community, we have chat rooms, trade alerts from our top traders, and educational content. You can join using the link below, and get a discount on your membership.

Disclaimer:

Please note that this email is my personal opinion only. I am not a licensed financial advisor, and any information shared or discussed is not to be construed as investment advice. Trading and investing involves a degree of risk, and is not suitable to all investors. Please consult with your financial advisor before making any sort of investment decisions.

Featured Pic: https://www.kbic.com/blog/healthcare-finance/files/2016/11/Job-Hunting-for-Thanksgiving-4-Tips-to-Bag-the-Quarry.jpg

This article will be updated throughout the day tracking any news on the FOMC press conference, tracking news, Powell's statements, and results with investor sentiment. This meeting will impact US indices including US30, as well as major currency pairs like GBP/USD, EUR/USD, USD/CAD, etc.
Featured Pic: https://www.google.com/url?sa=i&url=https%3A%2F%2Fwww.nbcnews.com%2Fbusiness%2Fmarkets%2Fwe-may-well-be-recession-says-fed-chairman-jerome-powell-n1169291&psig=AOvVaw1clhDC8PvVOe9UF4Htu9nJ&ust=1596123578700000&source=images&cd=vfe&ved=0CAIQjRxqFwoTCNjHnOzl8uoCFQAAAAAdAAAAABAD

12:36 EST

Fed Chairman, Jerome Powell is set to speak today at 2:30 EST. He will most likely have to address the most recent spike in cases that occurred in several states and what his plans are to carry forward. Notably, interest rates are expected to remain unchanged or somewhere in between 0-.25%. Powell may also discuss their current balance sheet of over $6 trillion and possibly an increase in more bond buying, according to Economic Times. High volatility is expected during the discussion. Overall expectation is that the Fed will probably do nothing excessive, and leave most policy unchanged with brief statements of positive forward-looking sentiment.

Federal Interest Rates:

https://tradingeconomics.com/united-states/interest-rate

Treasury Yield Curve:

https://www.gurufocus.com/yield_curve.php

2:06 pm EST

Powell says interest rates will hold as they are, but economic growth is much worse than 'pre-pandemic' levels in the statement.

In the Fed's statement, they said that they would, "support the flow of credit to households and businesses, over coming months the Federal Reserve will increase its holdings of Treasury securities and agency residential and commercial mortgage-backed securities at least at the current pace to sustain smooth market functioning, thereby fostering effective transmission of monetary policy to broader financial conditions."
Now it's time to wait for the conference in 20 minutes...

2:49 pm EST

Powell mentions economic inequalities saying that they are not related to monetary policy, but fiscal policy. He wants to decrease the unemployment rate and keep a tight labor market. They also plan to continue to buy and hold more mortgage back securities and increase credit flow in the economy. Powell is happy with their current strategy and think the economy is in a good place right now for recovery.
Markets are now flat...

Amid vaccine hopes and earnings, concerns lie ahead on the new stimulus bill called the HEALS Act. Markets sold off today as the announcement of the new bill is being discussed. The SPY at $322.56, down 0.19% at the time of writing this. Now questions remain on whether the bill will pass through or if the second round of checks will be stalled in August.

https://tradingeconomics.com/united-states/government-debt

Members of Congress are hesitant to accumulate more debt as we have mounted somewhere in between $26-27 trillion as of June 2020.

HEALS Act

After doing some research on what is in the HEALS Act on the Tax Foundation website, here are a few things that I found:
- $1,200 every month to single taxpayers who make under $75,000 adjusted gross income
- Expanding the Payment Protection Program (PPP) with another $190 billion
- Helping small businesses with up to $2 million loan for payroll costs
- $105 billion for students to return to school

If passed, the second round of stimulus will mount another $1 trillion to the existing $2 trillion from the CARES Act. The goal of the program is to instill a short term recovery will longer term growth in the economy. The additional $600 a week provided by the CARES Act expires this week and would not continue should the bill get passed. Instead, the money would cut to $200 a week which has made the Democrats in Congress unhappy. The second round of stimulus was supposed to be more of a 'mild' version of the first with the expectation that the economy would have been closer to a full recovery by now.

But, clearly that's not the case.

https://www.bls.gov/charts/employment-situation/civilian-unemployment-rate.htm

Unemployment rate as of June 2020 still stands staggeringly high at 11% unemployed, higher than the rates from the financial crisis in 2008. Small businesses are hurting the most as benefits are appearing to shrink. One thing to consider is that the relief bill may not be passed in time. The cure for coronavirus is still in the early stages of developing, although Pfizer announced it's second out of three phases in the clinical trial. Relief funds will surely run out before the end of the week, and a new round needs to be implemented. Some reports say that Democrats in the Senate are likely going to vote against it as it does not contain their suggested amount of at least $3 trillion.

What I think

There is not much time left to negotiate which means Americans' financial security relies on the stubbornness or cooperation of either party. In my opinion, it's likely that some form of the new HEALS Act will get passed within the first week of August or it's citizens will blame the party that postpones it. With both sides in agreement on several issues, it's only a matter of how much money they agree to spend. Any delay could cause more days in the red for the major indices. If the bill is passed on time, we could see some more of that bullish rally from the past couple months.

Here are some trade setups we like based on certain conditions:

If HEALS passes on time:
We see some potential long positions on the US30 anywhere in that support zone ($26,400s) on the daily chart. RSI not showing signs of being overbought yet with room to run.

If a delay is announced:
On the 4H chart, US30 has resistance on the falling trend line ($26,845) for possible shorts. Stronger support would lie around the 200 Day Moving Average.

Featured Pic: https://www.senate.gov/resources/images/col2_senatefloor.jpg


Thanks for reading! If you are interested in joining our trading community, we have chat rooms, trade alerts from our top traders, and educational content. You can join using the link below, and get a discount on your membership.

Disclaimer:

Please note that this email is my personal opinion only. I am not a licensed financial advisor, and any information shared or discussed is not to be construed as investment advice. Trading and investing involves a degree of risk, and is not suitable to all investors. Please consult with your financial advisor before making any sort of investment decisions.

Thoughts on Gold

Gold prices reached over $1,900 today as futures shot up in earlier this morning. This metal seems to gain more and more momentum as news between US and China becomes worse. Uncertain markets and uncertain currencies give gold more of an appeal to it. Although gold has been overbought on the 14-Day RSI for several days, it seems like there is no end to its demand.

An issue that always comes back into mind is that confusing times do not always bring out panic selling but panic buying as well. Investors don't want to miss out on the price swings so they continue to buy up positions before prices break previous highs at $1,918. That price is what we're looking at as potential resistance for the metal. We definitely think there is some downside potential ahead, but we don't think it will last long. A long position now would seem like a price chase but it could work out as we think gold has a little more room to run. Citi Group, on the other hand, feels that XAU can go all the way to $2,000 before major demand for the metal dies down. RSI currently at 82 which indicates that price is really high. A price of $1,918 in the next few days could set the RSI closer to 90 which means that investors might dump what they have before a pullback. Overall, we are bullish on gold but temporarily waiting for some give in prices so we don't go price chasing.

https://www.marketwatch.com/investing/future/gold

Futures still look promising although current price is well above July contracts. Pushing highs does not seem out of reach, but will wait to see what futures look like after once that level is hit. If they're trading higher than before, then a break in long term resistance will be a very bullish sign for investors.

Tech stocks

All US indices fell yesterday as big tech dropped after earnings. The surge of buying pressure from the passed months finally stopped when investors dumped shares to take profit.

Trade Ideas on NAS100

Prices initially fell after the index tested highs again and formed more resistance at $10,788. The last 4H candle actually came down to the 200H moving average before bouncing back up today. Some mild resistance in the way at $10,527, but stronger resistance lies above at $10,788.

Tech Stocks

Intel plummeted to April lows at $49.52 after earnings and news of their delay in chip production. RSI reading that price is oversold and could be something to consider looking in to.

Tesla falls over 4% today after the big sell off. Recent news states that Tesla is suing the company Rivian for possibly stealing some of Tesla's intellectual property. TSLA's run looks like it's taking a break for now.


Thanks for reading! If you are interested in joining our trading community, we have chat rooms, trade alerts from our top traders, and educational content. You can join using the link below, and get a discount on your membership.

Featured Photo: https://specials-images.forbesimg.com/imageserve/5da63b70db40260006202a39/960x0.jpg?fit=scale

Disclaimer:

Please note that this email is my personal opinion only. I am not a licensed financial advisor, and any information shared or discussed is not to be construed as investment advice. Trading and investing involves a degree of risk, and is not suitable to all investors. Please consult with your financial advisor before making any sort of investment decisions.

A1 Trading Company

A1 Trading Company is a financial services and media business founded in Atlanta, USA.
linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram