Nightly Briefing 7/23/20

We have stated over the past 2 weeks that into our July 31st/August 3rd top we favored the SPX most. A lot of SPX stocks have not rebounded yet but will play catch up. We have some members who are experiencing anxiety over another market rug pull or crash. Let’s go over the reasons why you need not worry barring meteor strike or alien invasion.

1. The stock markets of the world hold up the world economies. If allowed to correct significantly, based on everything else going on now (riots, protests, unemployment, Covid, China tensions, shutdowns), the world would be thrown into a complete collapse and perhaps the greatest depression the US has seen since 1930’s.

2. There is a ton of cash on the sidelines. Every dip, more and more of it gets redeployed. Banks and funds need big returns from the second half of the year. Many missed most of the initial Covid rally.

3. No one is brave or stupid enough to short the market and bet against the Federal Reserve.

4. Trump and his Treasury Secretary along with Fed Chairman Powell need the markets higher into the elections. Trump has made approximately 6 market calls since he took office in 2016 on the market's direction. Given that he has the single greatest source of insider information as the president, he is 6 for 6. He is well aware through his Treasury Secretary and Powell that liquidity is going to be injected into the markets for the foreseeable future.

5. War? Don’t count on it prior to the election. If we defused the start of a war with Iran who blatantly attacked US forces back in January of 2020, then don’t expect any real conflict to develop anytime soon. No country in the world right now wants conflict.

6. Market leverage is still near multi-year lows. Pre-Covid, we knew of some funds managing $20 billion but leveraging up to $200 billion nightly (10-20X). Firms like this were the cause of the exaggerated crash back in March, not the average investor.

7. Multiple vaccines will be out before year end. Wall Street is forward looking. New treatments are coming out each month. At-risk citizens are staying home and the average citizen is masking up. This is a highly contagious virus but thankfully the death rate is below .24%.

8. Every article you read online proclaims the next big crash is coming, the world is ending etc. But big institutional money which matters most will not shoot itself in the foot and panic sell stocks so they can have a huge down year with no profits and lose trillions from fleeing customers.

Markets will do what they do and continue to climb the wall of worry.

Look for funds to take profits on record earnings in the tech sector over the next 10 days. NDX had a great run and was the diamond of the indexes - expect some rotation into other sectors into August. We favor the DOW and SPX but don’t expect the NDX to drop. Again, avoid transports and small caps in our opinion for the next 45 days.

Our current thinking is a pullback into early August followed by a resumption of the rally into early September. We will know if this projected model will play out based on the size of the pullback that occurs after the Fed meeting. Nothing has currently changed our thinking, but the markets talk to us through price so we continue to listen.

There will be an intra-day update tomorrow on BLMN after we digest the corporate news and earnings release.

We will do the same for DENN next week when they report their numbers. 

The price of crude will stay elevated as there is a sweet spot to help oil based economies like the US and others. Consumption is going to do nothing but increase over the coming months. This trade should grind higher into the end of August.


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Important Disclosures: Investing in the financial markets can involve considerable risk, including loss of principal. Past performance is not necessarily an indication of future performance.  Actual clients may achieve results materially different from the results portrayed.  All material is for informational and educational purposes only and is not investment advice and is not meant to suggest that any securities are suitable investments for any particular investor.  All information reflects our own actions, beliefs, and processes for purely informational purposes. HEDGE FUND Z LLC IS A FINANCIAL BLOG FOR THE SOLE PURPOSE OF EDUCATION.  HFZ does not represent themselves as acting in the position of an investment advisor or investment manager for funds that are not under their direct control and fiduciary responsibility. 


Third party quotes and information may not be representative of the experience of HFZ customers and do not represent a guarantee of future performance or success. Many of the results displayed on our website were achieved using leverage, such as 2x or 3x leveraged ETF's or equity options 


The information included at HFZ and HFZ writing, research, and updates is prepared for educational purposes and is not a solicitation, or an offer to buy or sell any security or use any particular system.  Information is based on historical research using data believed to be reliable, but there is no guarantee as to its accuracy. HFZ does not represent themselves as acting in the position of an investment adviser or investment manager for funds that are not under their direct control and fiduciary responsibility. HFZ will not provide you with personally tailored advice concerning the nature, potential, value or suitability of any particular security, portfolio or securities, transaction, investment strategy or other matter.  


No information, nor any opinion expressed on the Site or in the Services, shall constitute a solicitation or an offer to buy or sell any securities mentioned therein.  The information presented on the Site and in the Services has been prepared without regard to any particular investor's investment objectives, financial situation, needs, capacity, and trading ability or experience. Accordingly, you should not act on any information on the Site or in the Services without obtaining specific advice from your financial advisors and should not rely on information herein as the basis for your trading and/or investment decisions.  HFZ cannot claim or represent that any of our Services are suitable for you. 


By your use of the Site and Services, you're agreeing that you bear responsibility for your own investment research, trades, and investment decisions. Only you can decide whether or not a trade is right for you and you agree to be liable for any trades you initiate at your brokerage using research and/or tools that we provide. If you ignore our advice to do independent research and choose instead to trade solely on information, analysis, alerts or opinions found in our Service or website, you have made a conscious, willing, free, and personal decision to do so. You also agree that HFZ, its directors, its employees, subsidiaries, affiliates, and its agents will not be liable for any investment decision, trade made or action taken by you and others based on news, information, opinion, or any other material published through our Site and Services.  

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