[Chart courtesy of MarketWatch.com]

1. Moving the markets

The bullish train kept on moving throughout the early part of the session, when suddenly the wheels came off, and the major indexes engaged in a swan dive, which was led in magnitude by none other than the Nasdaq.

Of course, the tech sector has been on a relentless ramp since the March lows by outperforming all other indexes. Hence, it is not surprising that it would lead on the way down as well.

The Dow held up the best by closing at its unchanged line, with the S&P surrendering -0.94% and Nasdaq being hit the hardest with -2.13%.

The initial sharp rally was fed by news from the FDA agreeing to grant “fast track” status to a couple of vaccines produced by Pfizer and a German biotech firm, which caused to the Nasdaq scoring another intraday high before hitting the skids.

Contributing to the sudden demise in sentiment was CA gov Newsom’s announcement to roll back the re-opening status to phase 1, which means closure of bars, gyms, indoor dining, movies, wineries, zoos, museums, etc.

In other words, we are going backwards, and those business barely in recovery and survival mode will have to deal with these consequences again. I am afraid, many will not survive this time.

On the other hand, the higher the number of Covid cases, and the more layoffs, the more bullish it is for stocks, commented Rabobank’s Michael Every:

… for the stock market to move substantially from this point on – since the market is now fully disconnected from fundamentals and is simply a derivative of endogenous liquidity and fund flow – Powell will need to find another justification to expand the Fed’s QE aggressively, as discussed in “JPMorgan Spots A Big Problem For Stocks.” Something like – for example – a second wave of the coronavirus pandemic.

Added ZH:

Michael is right, of course, however now that central banks basically have full control over capital markets, his job “to understand what the market is doing” basically boils down to just one thing – as Goldman explained, all investors care about first thing in the morning is whether to fight or follow the Fed. The rest no longer matters.

Such is the world we are living in and trying to guess what the markets will be doing is an exercise in futility. That is why we let long-term market direction determine our decision-making process, which includes heading for the sidelines, once our indicators flash the signal.

[Chart courtesy of MarketWatch.com]

1. Moving the markets

An early bump in the tech sector gave way to selling, as the bears took charge of today’s session early on. Increasing coronavirus cases in Florida, Texas and California added to Wall Street’s woes with even the Nasdaq temporarily succumbing to red numbers, albeit at a lesser degree than the other major indexes.

Almost 50 million Americans have now filed for first-time jobless benefits since the beginning of the lockdown, according to ZH. This week, we saw initial claims of 1.314 million, a slightly better number than the 1.375 million expected.  

Taking the starch out of the early bump, and dropping stocks suddenly, was news of the SCOTUS Trump decision that a NY Grand Jury can get access to Trump’s tax returns, prompting ZH to comment:

This sparked instant selling pressure on the market, as it seems investors may have suddenly come to the realization that Biden could win (and Dems take the Senate) sending the S&P into the red…

It seems the market cares about a Trump presidency after all…

In the end, the Nasdaq managed to crawl back into green, despite late news that Joe Biden wants to raise the corporate tax rate to 28%, while the Dow and S&P closed in the red, with the former taking the bigger beating.

I have some business commitments now, so this post will be a short one, but I will update the TTIs and the Spotlight table later this afternoon.

[Chart courtesy of MarketWatch.com]

1. Moving the markets

Another roller coaster day saw the major indexes fluctuate wildly with an initial rally being wiped out, which pushed the Dow and S&P 500 briefly in the red. The Nasdaq managed to stay in the green and then ripped to new intra-day highs late in the session, as all indexes joined in the bounce-back.

In the end, the Nasdaq again dominated the scene and produced another superb +1.44% gain, as we have seen all year long. The Dow and the S&P ended up only moderately higher.

Again, yesterday’s question as whether the unabated increases in Covid-19 cases in several states will delay a V-shape recovery continued to be the center of discussion. I believe it will, but another widely overlooked reason surfaced today.

ZH reported that the plunge in consumer credit continued as Americans repaid record amounts of credit card debt:

What we find most surprising, however, is that in this day and age when the Fed has effectively institutionalized moral hazard and where failure is no longer punished as capitalism is now officially dead and zombie existence is rewarded, Americans still care enough about their credit rating to pay down their own debt even as corporations and the country go on a historic debt issuance spree which everyone knows will never be repaid.

So how long until this shocking plunge in consumer spending reverses? The answer is that nobody knows, but until US consumers feel comfortable enough to once again “charge it”, there can be no recovery.

With 70% of the GDP being derived from consumer spending, a “true” organic recovery will not be in the cards until that sentiment changes again.

Regarding the markets, we must rely on the Fed’s expansion of its balance sheet to see further advances. As this chart shows, the flattening out in that very balance sheet has had the markets trading in a tight range since the early June highs.

Be that as it may, gold has been moving relentlessly higher and even its spot price has topped $1,800 for the first time since November of 2011, according to ZH.

Given the ever-increasing money printing efforts, which will lead to an increase of inflation and a decrease of the dollar’s purchasing power, gold should be an essential part in everyone’s portfolio.