Nightly Briefing 8/19/20


We are looking for a short term top (August 21st/24th), followed by a multi-day sell off preceding the rally into the USA Labor Day holiday weekend for a possible double top. Not all stocks will make double tops into Labor Day. Most may put in temporary tops next Monday. SPX 3,440-3,480 is our target into the Republican National Convention on Monday. President Trump wants to look good in front of the American public.


We did not include SPCE over the last two days so we will cover it first tonight. Our system’s target for November 2020 is $40 per share. It is carving out a bottom now and is trading below the recent offering price by several dollars, just like Denny's did for a brief period of time. Look at it now. We expect the same from Virgin Galactic - near term over $20+. We plan to stay with the position into November.


The big story today was the dollar. Empires die slowly and the dollar is no different. To expect a collapse straight to extreme multi-year support at 88 without several large counter trend rallies is unreasonable. This will put pressure on all asset classes short term as the dollar attempts to bounce. We had a failed breakdown today and many stops hit. We are looking for a multi-day bounce which will pressure commodities in particular.


We have been warning for weeks about a waterfall decline in the metals. It continued today after the Fed minutes were released. The Fed did not say anything unexpected, but Fed meetings are triggers for profit-taking events in the marketplace, alongside other events like monthly unemployment data. We expect weakness in the metals sector in the days ahead followed by a bounce and more weakness. Many gold bugs challenged our forecast and said 'this time it will be different.' It is almost never different and all of the recent traders that bought into the parabolic rise will all be underwater as we forecasted. We will all have an opportunity to buy the metals at lower prices as an intermediate correction unfolds into September and mid-October: $1750 gold, $20 silver are minimum targets with potential for lower targets. This will be our last opportunity to buy the metals sector before it sails away.



Expect  $23.50 to be tested in the days ahead with a possible large bounce. Silver will have the largest price swings in the metals sector over the next 45 days.


If gold shows us more strength into a mid-September bounce, we will re-think our forecast. Currently, our system is targeting an intermediate cycle low in early October. If gold bottoms sooner, we will revise our forecast promptly. If gold opens under $1920 futures tomorrow, expect a ton of stops to get hit in the futures market and a waterfall decline is possible. Thursday and/or Friday could see $1820 with residual selling into Monday from margin calls.


We watch XAU as it often gives us early clues to gold’s direction. It was the first chart to roll over in early August. We expect key support levels to be tagged over the next 10 trading days. We feel reduced short term long positions and hedges in metals are in order near term.


US steel was on its way to a breakout today trading at $8.24 before the dollar reversed and pressured stocks and most commodities. But it keeps pushing higher - a good sign. Our $9-$11 range should come soon.


We are looking to sell BLMN on the next decent spike. There are less tedious short term positions out there to have in our short term portfolio. Long term 3-6 months this represents great value.


BTC, a hedge against the dollar, felt pressure today with the US dollar's rebound and reversal from key support. September will be very kind to GBTC.


Oil was one commodity that fared well after the dollar reversed sharply today. Large crude inventory draw-downs were seen as demand increased from the Covid crash. We remain bullish on crude into our mid-September target of $34/$35+.

HFZ

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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.  

 

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