Wall Street Next Week: Financial astrology for the successful investor & trade

1. Market risk is HIGHLY elevated this August:

In August, the question will no longer be: “How high is UP?” but will become “how low and for how long?”

While buying on dips may still work at times for day traders, it will NO LONGER automatically be profitable for position traders i.e. August is here now.  Of course being short, also has it risks:

fiscal stimulus plans, vaccine data, US/China, & the elephant in the room, the U.S. election.

.While we anticipate a faster recovery than in the past, it will NOT a super charged V.

We see a U [or “skinny U”] US economic recovery but stock markets NOT V, L or U but W. 

Q4 US GDP will highly depend on US election outcome.

 RECOMMENDATION: 100% Protection until September.

First Trading Targets V1.4: SPX 3069  NASDAQ 10,058  

OUR VIEWS:

1. We have a short bias given elevated market risk now until late Summer. 
2. POST SUMMER INVESTMENTS SHOULD BE TARGETED FOR A POST COVID-19 WORLD:

for a “Recovery” rather than “Quarantine” portfolio. 

TRADERS SHOULD DAY TRADE OR HAVE VERY DEEP POCKETS;

• After hard rallies or market drops, it is smart to book profits.
• Watch +/- DJIA 26,500 NAS [11,146]
• Monday August 10 is potentially pivotal 

INVESTORS REQUIRE A LONGER TERM HORIZON THAN NORMAL.

We are no longer accumulating but selling stay-at-home stocks that have been winners from this crisis.

We will be planning a different strategy for the post November US Presidential Election.

Conservative investors may prefer Water Utilities, TIPs or high quality corporate bonds and dividend-paying stocks.  Precious metals will continue to shine.

AT THE RIGHT PRICE, AND RIGHT TIME FRAME, THE COVID CRISIS REPRESENTS DANGER & OPPORTUNITY. 

Commodity Trading:

Gold + Fall Astro, ++ Astro Nov/Dec  Rebuy late Summer Current Trading Range $1800-2200

Silver Astro is generally positive  $20 Support (& FV) $22 Pivot R1 25 R2 30

Copper  2.80 PIVOT 3 RESISTANCE

TRADING: Our approach is to enter early and exit early, medium risk with lots of profit none-the-less.

We have a short basis for August: SPX RISK 3350 SPX REWARD 2900-

Trading Shorts July 31: DJ 26,377  SPX 3271  NAS 10745

First Trading Target V1.4:  SPX 3069  NASDAQ 10,058

POSITIONAL SHORTS

DJIA SOLD 26000, 27000, 27001

SPX  SOLD 3150, 3150, 3145

2. Wine.com Seeks Funding at Valuation of More Than $1 Billion

HW: The obvious question is not what they have been smoking, but rather drinking!

HW: We await an August correction. Until then or perhaps later, we would not buy any of these companies.

We advise only fresh buying special situations &/or accumulating undervalued quality stocks for the long term.

 

Favorite H2 2020 Sectors:

Entertainment, Mining, Safety & Security & Technology (Undervalued & Highly Scalable)

Short term we are downgrading technology for the forecast August correction.

Intermediate term we are downgrading Select Health Care (lower cost/better outcome) due to potential future political risk e.g. Trump signs orders to lower prescription drug prices.

Stock selection is important. When possible, we prefer to recommend stocks sporting strong cash flows, sound balance sheets & growing dividends.

Choose your favorite stocks and patiently bid for them at near ideal prices if/when seen again [August?].

 

3. Major Chinese Banks Bar Customers From Buying Gold, Precious Metals

HW: Will East selling record high prices over shadow the West buying dips?

HW: I agree it is overvalued, but given its extremely strong astro this Fall (anticipated by markets?), gold is VERY likely to well reward investors in 2020 Year end.

Given newbie gold investors have little knowledge of the industry and many are accustomed to Tech valuations, is there an upper limit to Gold or Silver pricing? Maybe not!

In the meantime, Gold keeps making all-time highs and currently is in an 1800-2200 trading range.

Silver $22 resistance is now support with P2 25 or P3 30 next resistance levels. 

There are so many good buys in the precious metal space depending on your time frame and risk/reward desires. Here the trend is MOST definitely your friend.

Review past WSNW and AFUND luncheons & conferences for many good ideas that can be quite profitable this coming Fall/Winter. Also upcoming

Copper previously was undervalued largely as a pawn of the US/China trade spat & Wuhan Virus.

Now along with most other commodities, intermediate and longer term it sports favorable fundamentals.

Gold: Fundamentally there was a short term decrease in mine supply coupled with GREATLY increasing investor interest. Please note gold is under Highly favorable astrological influences late Q3 & Q4.

Longtime Gold bugs are happy that more generalist investors are beginning to join the party:

In addition, many major brokerage houses had $2000+  price targets into 2021.

These views are already validated, and more, if/when inflation fears resurface and/or if/with a falling US dollar!

We believe gold & silver valuations will largely sport well above Fair Value in this Year of the White Metal Rat (2020).

Just as they were undervalued for a long time, it CAN and is likely to be overvalued for a LONG time.

While fundamentally gold is currently overvalued, in much of the Fall & Winter, the astro is very positive for gold.

Hence we recommend a full and over weighted precious metals portfolio allocation.

However, we advise precious metal investors to also pay attention to stock selection.

• Gold remains cheap geopolitical crisis insurance.
• For investors who cannot or will not buy the $US currency as well as investors who wish to safely and cheaply hedge their US$ exposure, ONLY GOLD IS AS GOOD AS GOLD!
•  Once again some investors are hedging record equity prices by buying gold. They are not unhappy. 

Gold FV $1650= Commodity FV: 1591 + Currency FV: 1650 + Inflation Metal FV: 1550 + Crisis FV: 1809.

INVESTORS: We plan to stay LONG in H2 2020 with occasional hedging, selling or profit taking before the Fall.

Note: Our current Fair Value for Silver is ~$20.  

3. 3,“We disagree with conventional wisdom that a blue sweep this November is not so bad, or even potentially good, for the health sector given Biden’s more centrist roots.”
4. Kim Monk and Rob Smith, analysts, Capital Alpha
5. HW: We have downgraded the HealthCare sector pre-election due to high political risk There will be individuals winners, but more losers e.g. 133+ companies are pursing a COVID 19 vaccine, how many “winners” in this race will be there be next year? Most will drop off a cliff!

“There is an overwhelming amount of evidence that the labor market stalled in July.”

Aneta Markowska and Thomas Simons, economists, Jefferies

HW: Yes, and while things will improve, it is not a V recovery.

“Since 1920, every stock market decline >35% saw a symmetric price recovery.  In other words, the faster the markets fall, the faster the markets recover, and the ratio is 2.5X.  Given the speed of the 2020, this implied making new highs before the end of the Summer.”

Thomas Lee, founder, Fundstrat Global Advisors

HW: May be, but maybe not.  This is not our bet.

“North American E&Ps are in a battle for investment relevance, not a battle for global market share.”

Matt Gallagher, chief executive officer, Parsley Energy

HW: Vulture funds and distressed debt players will enjoy this.

 

4. A 10% selloff in the stock market is most likely, says expert who called March lows: ‘Something has to give’

 

5. READER: I'm laying low until the Bradley turn date of Aug 19. This thing's too strong now.

HW: I have mentioned that markets will down by my birthday i.e. August 19^th. However, I still believe and have bet, they will have topped beforehand.  Time will tell, in the meantime, we dance around our core trading positions as required.

READER: I should have bought some gold early this year.

HW: Yes, we did recommend that.  But gold will also be very strong this Fall, so you should have another profitable investment opportunity.