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ETF Tracker Newsletter For August 7, 2020

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DOLLAR POPS AND GOLD DROPS

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

The declining US dollar finally showed some signs of life and rebounded causing gold, after its torrid run, to give back some of its outsized gains.

It was a choppy and sloppy day in the markets with the Dow and S&P 500 regaining all of their mid-day losses, while the tech sector and gold were not able to and stumbled into the weekend with moderate losses.

All three major indexes started the session on the downside, despite the US adding 1.76 million jobs in July, but hiring slowed after the latest coronavirus outbreak. Despite the unemployment rate falling for the third straight month to 10.2% from 11.1%, it became clear that this alleged recovery is very fragile in nature and can reverse or even bite the dust at any time.

That is why market reaction was muted with various asset classes selling off, in addition to the fact that no matter how bullish momentum may be, nothing ever goes up in a straight line. Given the strong gains earlier in the week, today was a day of pausing and profit taking with the mixed jobs report providing the perfect excuse.

Analyst Jim Bianco saw it this way:

Talks on passing the latest stimulus package are stalled. This is stimulus checks and additions to unemployment insurance.

Does anyone doubt if the stock market tanked 10% to 20%, they would pass this bill immediately?

But it does not tank because the Fed and their “unlimited printing press” stand ready to halt any “unpleasantness” in markets.

So, the better the “wealthy” do (stockholders) the less the urgency to help the “not wealthy” (non-stockholders).

The worst inequality ever?

Not helping matters was that the biggest weekly short squeeze in two months simply ran out of steam today, as Bloomberg’s chart shows.  

In the bigger scheme of things, today’s pull-back was minor, especially when considering that for the week, the S&P 500 gained +2.45%, while the Nasdaq added +2.47%.

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