WASHINGTON – It looks like the major US stock market averages want to tell us something. Perhaps, despite relentless daily fusillades of negative news from the no longer mainstream media, US businesses and workers have decided to power America’s way out of our current, deep-but-fake coronavirus-inspired recession. Which could mean that we never really experienced a major bear market after all. America’s economy may still be in the midst of a powerful secular bull market.
Analyst proclaims US stock market actually still in a secular bull market
In spite of all the gloom and doom and the Democrats’ constant bleating that the Wuhan coronavirus pandemic of death and mayhem is really because Trump, we could find ourselves this week on the outer edge of what might be the greatest economic head fake of all time. If you don’t believe me, how about believing well-known technical analyst Tom Bowley? He posted the following observations way back in April in a free article on the subscription site Stockcharts.com.
“The bottom line here is that we remain in a secular bull market, despite the recent cyclical bear market downturn. 2020 is very similar to 1987 in that regard. In 1987, Black Monday (October 19th) didn’t mark the bottom. It was Blacker Tuesday (October 20th) that actually marked the bottom. But it’s noteworthy that the initial October 1987 bottom was never retested again. We got close, but never touched that Tuesday low. We were also in the 7th year of a two-decade-long secular bull market. Here in 2020, we’re also in the 7th year of what I believe will turn out to be a two-decade long secular bull market. We must keep things in perspective…
“The economic shock of this [corona]virus was priced (I might argue overpriced) into equities very quickly. As we come to grips with the actual effects, we’re seeing a significant rebound.”
True, the current significant rebound in stocks this spring has indeed succumbed to sudden waves of likely programmed selling squalls during its post-2020 crash recovery. But in response, stocks keep coming back for successive buying panics.
What’a a “secular bull market?”
For those not into Wall Street jargon, a “secular bull market” is a long term bull market, one during which stocks generally keep rising higher and higher. Any secular bull tends to get disrupted from time to time with bouts of hard selling, some of them quite nasty. These are termed “cyclical bear markets,” because they tend to be of short durationand occur during a secular bull. But then the secular bull reasserts itself and stocks continue climbing higher and higher.
This week’s action, at least thus far, reinforces this alternating pattern. A powerful Monday rally, with the Dow briefly up over 1,000 points on the day. Followed by an almost predictable Tuesday downer that, nonetheless, didn’t come close to wiping out that Monday gain. Or, as CNBC described it, “Wall Street took a breather on Tuesday following a massive rally in the previous session.”
So what would we expect today, Wednesday? Well, another likely rally, no doubt, spitting right in Tuesday’s half-heartedly bearish eye. We continue to get signs that the US stock market remains in its post-Great Recession + Trump Rally secular bull uptrend.
As we approach the 10:30 a.m. ET mark today, we find the Dow bouncing between +385 to +405 points (an approximately 1.6% gain thus far, with the broader-based S&P 500 and the tech-heavy NASDAQ keeping pace, percentage-wise, and even exceeding it.
Mnuchin and Powell hold forth
Part of Tuesday’s downside confusion was due to conflicting testimony delivered at a Senate Banking Committee hearing by Treasury Secretary Steve Mnuchin and Fed Chair Jerome Powell as again reported via CNBC.
“Mnuchin said the government is ‘fully prepared to take losses’ on coronavirus business bailouts. Powell noted ‘this is the biggest response by Congress ever and the fastest and biggest from us,’ referring to the Fed’s and Congress’ efforts to stimulate the economy during the pandemic.”
Mnuchin’s overall response actually seems a bit more conservative than Powell’s. The latter has tended to dither about things like interest rates and money supply. That is, until the Coronavirus Crash thundered down Wall Street as businesses were forced to close left and right as massively unemployed US citizens huddled in their bombshells waiting for The Plague to carry their entire family off to cross the River Styx.
It was at that point that Powell began to unleash every stimulative move in the Fed’s arsenal, including some that might not actually have been there. What he’ll be looking for now will be for Congress – and particularly the House – to take a number of further, targeted actions meant to put Americans back to work and get the economy cranking again.
Welcome to Pelosi’s Impeachment Party
All of which would be far better for the country than the still-absent, Pelosi-led House’s reversion back to the norm. But the Democrats – now perhaps better described as America’s Impeachment Party – would rather spend the time coming up with yet another seditious pretext to impeach President Trump. Again. Perhaps fearing he may actually beat Slow Joe at the polls this November. Oh, and yes, there’s also Pelosi’s Bible-sized giveaway legislation that, if passed, would do little to help get America moving again. Instead, Pelosi offers her handcrafted tome of well-funded schemes to Make America Socialist again. Maybe she was on a premium ice cream sugar high when she and her pals drafted this bag of socialist goodies.
It would be interesting to see what Powell might have to say about that when the Fed releases its minutes at 2 p.m. Wednesday afternoon. If he does voice an opinion on this issue, he’ll probably air it in the usual garb of Washingtonspeak bafflegab. But we’ll look for it anyway.
Let’s feed the US stock market recovery for fun and profit
Buying US stocks that feed the recovery. The most successful pattern for investors these days is this one: Cautiously scoop up small positions in select “recovery” stocks on down days. Then enjoy the up days without chasing any stocks at all. We’ve provided some ideas we’re using or attempting to take advantage of in a pair of recent articles. You can find them here, and here.
Hopefully, the positive Wednesday action should continue through today’s closing bell, depending on how traders interpret whatever Jay Powell and the Fed happen to say, of course.
In the meantime, however, we tend to agree with Tom Bowley’s thesis, as expressed earlier in this article. “Everybody” seems intent on declaring a Second Great American Depression. Which could very well mean that the secular (i.e., long-term) bull market and the Great Trump Rally have merely been taking a breather. We’ll get to figure this out for ourselves in the coming months. And we’re betting with Bowley on the US stock market right now.