WASHINGTON – Good Monday afternoon. We’ll likely enjoy an eventful incoming news and trading week to close out the month of August. Be sure to prepare for some crazy market moves. Stocks may bounce along with the ups and downs of this week’s “virtual” GOP commercial. We mean “convention.” We certainly hope the Republicans’ prime time ad fest proves more entertaining than last week’s Evergreen
Communist Democrat snooze fest.
In any event, tighten your seat belts and be prepared for some big time headline risk to your portfolio this fall. No escape.
Last week’s Democrat snooze fest almost put Mr Market to sleep
Somewhat appropriately, last Friday’s meandering market action echoed the unending boredom and fakery that pervaded the weeklong Democrat snooze fest. Trading action showcased Mr Market’s (and the Democrats’) recent talent for pitching you one thing while doing another. Offscreen, of course. Market averages stubbornly clawed higher, more or less, despite Joe Biden’s Fantasyland address to his Communist faithful. Republicans must have turned Green with envy. Maybe this week’s incoming GOP commercial will help remedy their hangover from the notoriously bad Democrat snooze fest.
Meanwhile, under the surface, Mr Market seems to be doing the opposite of what the averages tell us. The ongoing bullishness on Wall Street is increasinlgly limited to a diminishing number of superstar popular stocks, like Apple (trading symbol: AAPL) et. al. But the only thing the public seems to see are those skyrocketing major market averages.
Two-tier stock market action
But beyond those widely touted major market averages, many garden-variety common stocks continue to get whacked. Most stocks in our purposely well-balanced portfolios, continued trending down Friday, albeit modestly. Looking longingly at those market averages, this makes us feel like we completely missed the boat here.
This kind of disjointedness makes for mass confusion in small investor land. After all, we’re not the only small investors who try to make a half-decent living via the sometimes sneaky and often uncooperative Mr Market. The high-speed traders, and now those madcap millennials, the Robinhood gamesters, seem intent on rendering traditional stock valuation methods almost worthless. Maybe investing is being reduced to one, big, value-free video game. OK, Boomers? Maybe not.
Take a look at our headline graphic above and you’ll see what we mean. A recent McClellan Oscillator chart (close of business Thursday, August 20), show the telltale signs that we’re slipping into an undefined period of bearishness. And yet, with rare exceptions, the market averages seems to be in perpetual rally mode. Last week, the S&P 500 average smartly broke its pre-Covid-19 top in recent action. Meaning, it’s now above where it crashed in Covid-19 March 2020. But that’s bullish, right?
The problem once again is this. It’s only a few major large-cap stocks in that are carrying the load. A ton of other stocks have been choking for at least a week. The averages mask this negative action. But the McClellan Oscillator has caught it, as you can plainly see in the chart above. The oscillator’s endless wavy line continued to sink below the chart’s zero-axis for the last few trading days, illustrating the soft underbelly of the current rally.
Can this week’s GOP commercial rescue voters (and stocks) from a nasty fall presidential campaign?
Mr Market is likely previewing an increasingly nasty fall presidential campaign. Having failed in their serious yet laughable attempt to impeach President Trump as we launched the New Year, the Democrats and their leftist thugs launched a two-pronged attack this spring on both Trump and his heretofore Election Winning Trump Rally in stocks.
As Democrats politicized the Coronavirus mess and tried to get a clearly effective (but cheap) existing prophylactic medical cocktail off the shelves, their underground army of Brownshirts (Antifa and BLM) remained organized and ready to erupt into a years long Communist revolution the moment an appropriate race based incident surfaced. Which was, of course, provided by the late, unfortunate (but hardly saintly) George Forbes and the apparent manner of his death by cop. Bring it on! Chicago 1968 Redux. Funded by Soros and lefty Boomers in their final Communist hurrah.
It’s been medical, economic and physical chaos ever since. Last week’s Democrat snooze fest didn’t help. And they mean for it to stay that way. The media plans to help during this week’s GOP commercial. They’ll cover very little of it, while directing blame for everything bad on President Trump.
But they won’t tell you much about his betrayal by the certifiably stupid, slipshod actions and advice from the career leftists running the CDC and the FDA. This is still not, in any sense of the word, the “Trump administration.” It’s an incompetent amalgam, courtesy of the Clinton and Obama regimes. That’s why Congress has slow-rolled Trump appointees for going on 4 years now, all the better to keep those incompetent holdovers and fifth columnists in their corner offices to continue the #Resistance. Disgusting.
Yet we digress.
The mob continues to control the streets of America’s major cities. Democrats say nothing
And to make things even more fun, every time the President lifts a finger to save several American cities from complete destruction (explicitly encouraged by the Commie Mayors these cities elected, along with Soros-funded prosecutors who are under orders never to arrest any of the Soros-funded professional rioters), the Communist Democrat Party functionaries blame it all on Trump, and pass their latest fables on to the “mainstream media” to Trumpet during prime time every evening. There was not one single condemnation of those treasonous Antifa and BLM bastards during the Democrat snooze fest. In other words, the Democrats approve of their message.
The Democrats Go Postal
At the same time, the Nancy Pelosi Democrats decided to open yet another front in the election wars, this time inventing the Post Office Crisis that wasn’t. Their twin aims here are to create a cover story enabling them to throw this fall’s election results into chaos by disputing mass quantities of (illegally cast) mail in ballots. At the same time they’re cobbling together the ground game for Trump Impeachment II should the Bad Orange Man somehow happen to win on November 3.
What a load of disgraceful, seditious crap.
Coronavirus and Communist-driven chaos continues to be reflected in the stock market. But you can’t always see it
It’s chaos like this that drove last week’s slowdown in the Great 2020 Comeback Rally in US stocks. And it’s what’s happening just underneath the market’s hood. Its engine has blown a gasket. But we’re not seeing or feeling the damage just yet due to the spectacular performances of Apple, Amazon (AMZN), Alphabet / Google (GOOGL), Facebook (FB) et. al. And this is what we’re seeing in the latest McClellan Oscillator chart above, courtesy of Stockcharts.com, an investment research service to which this writer subscribes.
On the other hand, the market volatility index known as the VIX, after an upward blip Thursday, seems to have settled down Friday to near normal conditions as we can see in the following chart, updated at around 2 p.m. ET Friday afternoon. The VIX has trended down for many weeks now, indicating that Mr Market’s Fear and Loathing days have come to an end, at least for now. And this tends to indicate a more stable and benign market. Until it doesn’t.
Communist Democrat Party has the votes to pass meaningful relief bills at the drop of a hat – and ones the President would likely sign. But, like solving the illegal alien invasion problem, this is a party that would rather have a campaign issue than a solution. So look for conflict and indecision to reign supreme next week and beyond.
On to Monday market action…
As for Monday’s market action, who knows how things might turn out? The bulls are back, encouraged by yesterday’s presidential announcement that the FDA (with considerable prodding) okayed a novel (but not fully vetted) coronavirus treatment / preventative that involves the use of blood plasma carrying anti-Covid-19 antibodies.
That, plus promising, rapid coronavirus developments from several national and international pharma giants, injected a good bit of hopiuminto Monday’s bullish trading action. The Dow has remained up a good 240-275 points all day for gains hovering close to 1%, with about 1.5 hours to the closing bell. The NASDAQ is back in its uptrend, and the broad-based S&P 500 continues to claw its way toward new record highs.
We’ll see how long this lasts. After the close, we’ll look to see if the McClellan Oscillator has reversed course. If it has not, we’ll continue to worry about the stamina of this summer’s absolutely stunning bull market rally.
– Headline image: McClellan Oscillator, as of COB Thursday, August 20, 2020. Courtesy of Stockcharts.com.