[Chart courtesy of MarketWatch.com]

1. Moving the markets

The whipsaw moves in the major indexes continued with utter abandon when, after a nice rebound high for the session, markets hit a glass ceiling and tumbled back into the red.

Traders were on edge early on when the futures failed to recover from Wednesday’s spanking, as a host of Fed speakers urged further fiscal stimulus, especially in view of the fact that another 870k Americans filed for first-time unemployment benefits—over the last week.

These claims have been steady, unfortunately, and remain at a pace that is four times the pre-Covid-lockdown average. Despite some pundits seeing a light of the end of the tunnel, it certainly does not look like anything resembling a V-shape type of recovery.  

The mid-day reversal was caused by news that “no talks” were scheduled between Mnuchin and Pelosi, killing early speculation that a new round of economic stimulus talks were about to resume.

ZH summed up the dilemma like this:

Alas, that does not answer the $64 trillion question: who will blink first, Powell or Pelosi, and linked to that: what is the strike price of the Pelosi Put? In other words, does the S&P have to drop much more before the top House Democrat agrees to the republican bid of a $1.5 trillion stimulus, or will she hold out for the $2.2 trillion Democrat ask, no matter where the stock market is. That said, one would assume that Democrats would be delighted to see a stock market crash ahead of the election: after all, Trump has repeatedly confirmed that he views stocks as the only “objective” barometer of his administration, which is Democrats would be delighted if said barometer were to be much, much lower.

Helping the markets and precious metals to remain in a more upbeat mood was the US Dollar, which ended not only a 4-day win streak but also its biggest surge since March.

And again, when looking at the big picture, we can see that the analog to 1929 still holds:

Will history really repeat itself?

[Chart courtesy of MarketWatch.com]

1. Moving the markets

After equities appeared to have found some footing yesterday, resulting in a short bounce this morning, it was all downhill afterwards with the Nasdaq leading the charge into the red, as September’s struggles continued.

Added CNBC:

The S&P 500 and Dow are down 7.5% and 5.9%, respectively, for the month. The Nasdaq has dropped 9.7% over that time period. Shares of Facebook, Amazon, Apple, Netflix, Alphabet and Microsoft are all down at least 11% in September.

The fallout from the coronavirus persists with the UK announcing that they will be shutting down again, but President Trump confirmed the U.S. “would not be implementing a second round of lockdowns.”

On the stimulus front, the battles go on with the warring parties not having gotten any closer to agreeing on a mutually acceptable package. Despite Fed head Powell stating before Congress “that further fiscal stimulus is needed for the U.S. recovery to continue,” politics seems to reign over economic necessities.

In the process of today’s broad-based sell-off, gold got slammed again thereby losing its $1,900 level, as the US Dollar surged and reached a 2-month high while also breaking its 50-day M/A to the upside.

While most of the FedSpeak today was bearish on growth in the absence of any fiscal stimulus, tomorrow’s line up of Fed Speakers may be a show to watch. Here’s their agenda. With that in mind, ZH quipped that today’s market dump may have been simply a message to the Fed: “Get back to work!”

[Chart courtesy of MarketWatch.com]

1. Moving the markets

Despite staggering around their respective unchanged lines for most of the session, a mid-day burst propelled the major indexes solidly into the green with the Nasdaq leading the charge.

The S&P 500 snapped a 4-day losing streak supported by soothing words from the Fed:

Traders also digested remarks by Federal Reserve Chairman Jerome Powell, who reiterated the central bank will support the economy “for as long as it takes.” Powell added that, while the path forward “continues to be highly uncertain,” economic activity has “picked up.”

However, the jury is still out as to whether this is the “beginning of the end of the selloff,” as Jim Cramer calls it, or is there more wisdom in the words of billionaire Barry Diller that “it’s time to raise some cash?”

While nobody knows for sure, in these times of great uncertainty, I am personally more in alignment with Barry. After all, the downside risk can be huge, but on the upside, you merely give up a few percentage points by re-entering at a later but much safer time frame.

Others seem to agree:

“Some money is being taken off the table pre-election, and as we approach elections in the next six weeks I think there will be more of this happening,” Saed Abukarsh, senior executive officer at Ark Capital Management Dubai Ltd., told Bloomberg Television. “We’re now consolidating into a lower range in the S&P.”

Of course, the coronavirus and its potential vaccines, the SCOTUS nomination and uncertainty around the election continue to be headlines which, depending on any outcomes, could swing markets in either direction.

Technically speaking, all the major indexes remain stuck below their respective 50-day M/As but were helped into the green by another short-squeeze, the best tool available to rescue a sinking ship. Today was no exception, as Bloomberg’s chart shows.

Not helping Gold was the US dollar, which not only ripped higher after yesterday’s bounce but also managed to break its 50-day M/A to the upside.  

[Chart courtesy of MarketWatch.com]

1. Moving the markets

As the futures last night indicated, today would be a downer for the markets, and that’s exactly how it turned out. The Dow was down over 900 points mid-day but recovered to “only” close in the red by some -500 points.

The other two major indexes slumped in similar fashion but recouped better in the end, with especially the Nasdaq almost reaching its unchanged line. Still, one of our holdings clearly pierced its trailing sell stop and was sold.

Of course, the question is: “Is the tech melt over, or has it just started?” No one has the answer, so we have prudently followed our sell stop discipline and took some money of the table, the process of which started almost 3 weeks ago.

The culprits for today’s dump were the same ones as last week, with fears being stoked about the coronavirus’ resurgence across Europe, while at the same time the lack of progress of any stimulus programs rattled the markets. Of course, no doubt, the passing of Bader Ginsburg added a whole new dimension to the word “uncertainty.”

CNBC added some color:

In Washington, negotiations for a new coronavirus stimulus bill could become more complicated after the passing of Supreme Court Justice Ruth Bader Ginsburg, which could lead to a bitter nomination process ahead of the election. President Donald Trump said he would nominate someone this week to take Ginsburg’s seat. Republicans and Democrats have been in a stalemate since July after provisions from the previous stimulus bill expired.

Regarding the markets, there was no place to hide with the Dollar surging, which sent gold reeling, while stocks and bond yields tumbled.

It remains to be seen how much more downside momentum lies ahead of us, or of this will be close to the bottom. Does not matter, as in these uncertain times, I think it’s wise to be a little cautious, rather than reckless, when it comes to market exposure.