Between today and Labor Day, upside targets are 3,500 with maximum upside to 3,580 into September 7th. We will see how strong the markets are and how committed the Plunge Protection Team is to keeping them elevated after the Republican Convention. We have a share market pullback starting as soon as tomorrow into August 31st, with a possible lower low early Tuesday, Sept 1st. If the market barely drops lower into this date, we would be more bullish. Our current thinking is a pullback into Tuesday AM followed by a rebound into a double top Sept 7th, 3,500 SPX. The markets have never been more challenging to forecast due to Fed intervention. Corrections simply don’t occur on time within normal cycles and sentiment can remain extreme and overbought longer than you can stay liquid - caution is warranted. We have several indicators indicating a reduction of liquidity by the Fed and its members. We will have an idea by early next week if we are going to get another higher high into September 23rd after the FOMC. Again, our system is confirming a high probability event of two sided action in the month of October. There will be heavy volatility. We are highly confident we are going to have a split month with a plunge early, likely followed by a recovery into November 3rd. It is possible it inverts, time will tell. There remains the chance we start to roll over after September 7/8th and never look back with lower highs and lower lows into December. It is all a matter of how bad the Fed wants to keep the markets elevated and not allow normal corrections to occur. If the rally continues, it will be led by just a handful of mega tech stocks without broad participation. The usual names, FAAMG. Notice the Dow Jones added Salesforce, Honeywell, and Amgen this week and removed Exxon, Pfizer, and Raytheon. The Dow wants to make sure it remains weighted heavily in technology. The formula for the Dow you observe in your ticker daily is measured proportionally to each company’s share price - not market capitalization value like the SPX. Recently, Apple executed a 4-for-1 split, reducing its price significantly, which is not good for the DOW. The DOW wants to remain relevant and elevated. Our real economy is nothing but smoke and mirrors built on a house of cards, and these little details matter to the banking establishment. Investors with a time frame into next May 2021 can remain confident and long. Traders need to exhibit caution after Labor Day weekend in our opinion.
BTC may have started our breakout into September. We will know over the next few days if it has occurred or will hold off until after Labor Day, September 6th.
Hurricane Laura makes landfall within the next 24 hours into two heavy refinery laden states, Texas and Louisiana. Expect crude to remain elevated and climb into September 23rd.
Sentiment put in a short term bottom yesterday and may bounce, giving us a rally into September 1/2 in the metals complex.
We expect the dollar to give us a tremendous bounce sometime in September. We are watchful for an inversion and for sentiment to remain embedded in oversold territory, under 40, into late September. This signature would give our metals trade more time to rally, potentially into September 23rd for a final top. All courtesy of the Fed and its money printing. However, our current expectation is for a bottom in the USD next week and for a rally to occur into October.
Metals bottomed this AM and have set the stage for a bounce into next week, September 1/2nd. The biggest deciding factor on whether the metals rally into early October or correct will likely be the Fed. If they continue with QE and preventing normal corrections in the stock market, pressure will be kept on the US dollar. If the Fed lets the markets correct in September like normal cycles and our system say “should” occur, the USD will spike and metals will drop with stocks. No single person or entity, even the Fed, can manipulate long term trends. However, short term days or weeks can be altered with accommodative action. Longer term cycles are forces of nature and can be influenced, but not altered.
We chose silver because it has a more bullish profile than GDX or GLD. It is capable of producing new highs into next week, whereas the other two project lower highs. Some people have asked about levered ETF’s and options. It is far too late (5 months+ without a serious correction) in the intermediate advancing cycle to be using leverage. Miners move more than bullion, so we have some extra built in without the risk of decay if we get caught in the trade. If silver moves like we think it should over the next few days, SILJ will outperform SLV. After the next intermediate degree correction will be a great time for leverage in metals. We will most certainly alert and add levered positions to our short term portfolio.
Between now and Labor Day, the 200 DMA should be hit as a minimum upside target.
Denny's has until September 7th to gain some traction for us. We will make a decision at that point to keep or cut it from the short term portfolio.
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