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

1. DJIA 36K or 34K Next?

Given recent market action, either seems possible but July 26-August 11 is coming; until then, investors are living dangerously on the precipice.

We continue to fight the trend and the Fed and maintain defensive protection:

High cash levels cash, low or no margin, writing calls, hedging, very short-term trading and buying only special situations through August.

Sell by AugustCorrection odds by August 76% Bear Market by August 61% 

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We are not buying today’s pyramid games will continue forever.  Possible triggers beyond Delta Covid fears include:

• Bitcoin collapses (30K support broken which it will sooner or later) would do it. 
• Another landmine would be TNX >1.50-1.75.
• In addition to “I” word inflation well above 2%, the dreaded “T” word- not the Trillion Dollar infrastructure package but TAXES!!!
• A change in perspective- comparing not to last month or last year, but a longer term horizon leaves little upside to analyst projections.
• FED tapering or warning of future course shift or simply losing credibility!
• The usual assorted geopolitical threats including US/China aggressive escalation.

 

I am unwilling to buy at today’s prices, especially SPX > 4000: given the potential downside risk.

Outside of day trading and special situations, we plan to sell/short and wait to buy if/when markets are 11%-20% lower. 

PIVOTS         2020 Close  10%-            Nov 3                                                                                                                              

DJI 35000      30606          31500           27480          

SPX 4400       3756             3967             3369            

NAS 15000    12888          13605           11160

Most computer programs also monitor their50 & 200 DAY MOVING AVERAGESFOR SUPPORT TESTS.

Inflation is now above 5% and I don’t believe it is just “temporary”; if the global economy slows, we are then likely to see STAGFLATION!

Given still high valuations, we do not see sufficient FUNDEMENTALS (Fed accommodation, Vaccines & Stimulus Packages) to justify SP500 earnings.

Our recommendation continues to be maximum portfolio protection.  

TSLA, BTC, VIX, GME & TNX are our five market “canaries in the coal mine”:

When three or more canaries sing, be ready to Head for the Hills (&/or your nearest bar) .

TNX:              > 1.50-1.75

TSLA:            < 666-555

VIX:               >22-26

BTC:              < 42-30K

GME:*           <50-30

*Gamestop & stocks such as AMC [>20] or COIN [>225] are like Bitcoin, their trading has little or no relationship to reality. 

Public valuations of large, mid and small cap companies remain near their highest levels in recent history.

Short of a reality check that the emperor has NO clothes, newbies learning that all stocks do NOT go UP ALL the time can also time market tops (by August).

TRADERS SHOULD DO QUICK DAY TRADES OR HAVE VERY DEEP POCKETS

• After hard rallies or market drops, it is smart to book profits.
• Odds of a market drop into August is HIGH- Be prepared.
• This coming week we may short aggressively but with agile dancing as needed & careful money management: Markers 1 DJIA 35061 SPX 4411  NASDAQ 14836

Commodity Trading:

Gold             Buy on dips Rinse and repeat Last buys 1812 & 1798

Silver            Accumulate on dips < 25.25 First buy 25.15

Copper         4.30 Pivot 4.50 Resistance 4.10 Support

Oil                 Sell/Short >72-74 66 Support First Sell 72

1. DJIA 36K or 34K NEXT?

Given recent market action, either seems possible but July 26-August 11 is coming; until then, investors are living dangerously on the precipice.

We continue to fight the trend and the Fed and maintain defensive protection:

High cash levels cash, low or no margin, writing calls, hedging, very short-term trading and buying only special situations through August.

Sell by AugustCorrection odds by August 76% Bear Market by August 61% 

-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We are not buying today’s pyramid games will continue forever.  Possible triggers beyond Delta Covid fears include:

• Bitcoin collapses (30K support broken which it will sooner or later) would do it.
• Another landmine would be TNX >1.50-1.75.
• In addition to “I” word inflation well above 2%, the dreaded “T” word- not the Trillion Dollar infrastructure package but TAXES!!!
• A change in perspective- comparing not to last month or last year, but a longer term horizon leaves little upside to analyst projections.
• FED tapering or warning of future course shift or simply losing credibility!
• The usual assorted geopolitical threats including US/China aggressive escalation.

I am unwilling to buy at today’s prices, especially SPX > 4000: given the potential downside risk.

Outside of day trading and special situations, we plan to sell/short and wait to buy if/when markets are 11%-20% lower. 

PIVOTS         2020 Close  10%-            Nov 3                                                                                                                              

DJI 35000      30606          31500           27480          

SPX 4400       3756             3967             3369            

NAS 15000    12888          13605           11160

Inflation is now above 5% and I don’t believe it is just “temporary”; if the global economy slows, we are then likely to see STAGFLATION!

Given still high valuations, we do not see sufficient FUNDEMENTALS (Fed accommodation, Vaccines & Stimulus Packages) to justify SP500 earnings.

Our recommendation continues to be maximum portfolio protection.  

TSLA, BTC, VIX, GME & TNX are our five market “canaries in the coal mine”:

When three or more canaries sing, be ready to Head for the Hills (&/or your nearest bar) .

TNX:              > 1.50-1.75

TSLA:            < 666-555

VIX:               >22-26

BTC:              < 42-30K

GME:*           <50-30

*Gamestop & stocks such as AMC [>20] or COIN [>225] are like Bitcoin, their trading has little or no relationship to reality. 

Public valuations of large, mid and small cap companies remain near their highest levels in recent history.

Short of a reality check that the emperor has NO clothes, newbies learning that all stocks do NOT go UP ALL the time can also time market tops (by August).

TRADERS SHOULD DO QUICK DAY TRADES OR HAVE VERY DEEP POCKETS

• After hard rallies or market drops, it is smart to book profits.
• Odds of a market drop into August is HIGH- Be prepared.
• This coming week we may short aggressively but with agile dancing as needed & careful money management: Markers 1 DJIA 35061 SPX 4411  NASDAQ 14836

Commodity Trading:

Gold             Buy on dips Rinse and repeat Last buys 1812 & 1798

Silver            Accumulate on dips < 25.25 First buy 25.15

Copper         4.30 Pivot 4.50 Resistance 4.10 Support

Oil                 Sell/Short >72-74 66 Support First Sell 72

 

 

KEY DATES:        July 26-31 August 2-4, 9/10, 11

DJIA:                     35000 RESISTANCE

SPX:                     4350 PIVOT

NASDAQ:             14500 PIVOT0

GOLD:                  1800 PIVOT R1 1834 R2 1855

SILVER:                25 S1

OIL:                       68 PIVOT R1 74 S1 70

COPPER:              4.25

US 10 Year:          1.30 PIVOT  S1 1.25  R1 1.50

DXY:                      92 PIVOT R1 94

VIX:                       18 PIVOT R1 22 R2 26

BTC:                      35K PIVOT S1 31K S2 30K S3 24K

 

2020 CLOSE:          DJIA 30606 SPX 3756 & NASDAQ 12888

2019 CLOSE:          DJIA 28508 SPX 3231 & NASDAQ 8823  

2018 CLOSE:          DJIA 23327 SPX 2506 & NASDAQ 6635

AFUND Fair Value  GOLD $1833

Reduce Risk and Focus on Capital Preservation:

THINK TRADITIONAL SWISS AND PRESERVE CAPITAL: HEDGE AND PROTECT AGAINST DOWNSIDE RISK.

 

2. Upcoming our August 18 AFUND Stock & Commodity Webinar

General Advice:

• Review your Portfolio Holdings for possible changes.
• Prepare a list of GOOD stocks to buy AFTER a 15-20% correction. Choose your favorite stocks and patiently bid for them.  
• Stock selection is important. Include some stocks sporting strong cash flows, sound balance sheets & growing dividends.
• Include some investments that can benefit from higher inflation such as gold, TIPS, utilities, Art/Blue Chip collectibles and selective real estate etc.

Favorite H2 2021 Sectors:

Entertainment, Mining & Technology [AFTER a 20% correction if Undervalued & Highly Scalable]

Currently we are also watching some Select Health Care (lower cost/better outcomes, & Distressed Investing for H2 2021.

Note: With Oil above $70 we continue to recommend reducing/covering Energy bets.

 

3. Is gold at risk of a selloff next week? Analysts sound alarm as markets eye Fed, U.S. data

HW: It is possible, but if so, that is another (final) opportunity for cheaper gold buying as soon gold will be entering its favorable seasonal cycle.

One can only imagine when Bitcoin meet reality, how it would likely to usher in a rapid source of many new gold investors.

Gold Fair Value is $1833 with $1775 support and $1925 overhead resistance.

Silver Fair Value $27 $25 support and $30 overhead resistance.

 

There are many good buys in the precious metal space depending on your time frame & risk/reward desires.

See recent AFUND luncheons, conferences & past Webinars have been posted on our YouTube channel] for some investing ideas that may be profitable in 2021.

Gold: Fundamentally the global political and economic situation is very favorable for precious metals.

Precious metals remain favorite sections. Many generalist investors now have some interest in Metals and Mining.

Also, it is under allocated by most investment programs, this gives it even more potential room to run, especially as inflation fears resurface &/or if US dollar weakens!

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

However, we advise long term 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 $US currency as well as investors who wish to safely and cheaply h [email protected] their US$ exposure, ONLY GOLD IS AS GOOD AS GOLD!
• Once again, some investors are hedging record equity prices by buying gold.
• Low real interest rates is positive for gold as well as low global bond yields makes gold an attractive alternative risk mitigation hedge.
• We expect precious metal stocks to outperform physical gold & silver in 2021.

 

Gold FV $1833 = Commodity FV: 1670 + Currency FV: 1804+ Inflation Metal FV: 1808 + Crisis FV: 2050

INVESTORS: We will stay LONG in H2 2021 both as an investment and as a portfolio hedge.

 

4. Summer seasoned speculator picks: TBA

Many picks are best for speculative portfolio allocation and as such bought as a member of a group of 5 to 10 such stocks.

Remember NOT to ignore potential High Risk - meaning use speculative allocation i.e., “money you can afford to lose without altering your lifestyle.”

Always do due diligence before deciding to act. 

 

5. "Pain is a sign you're investing well."

Allan Roth, certified financial planner, Wealth Logic

HW: BS!

“Incredibly, we haven’t seen as much as a 5% pullback since October. Although we firmly think this bull market is alive and well, let’s not fool ourselves into thinking trees grow forever. Risk is no doubt increasing as we head into the troublesome August and September months.”

Ryan Detrick, chief market strategist, LPL Financial

HW: Yes, Risk IS increasing.

“We see a continuation of the last couple days. It’s roller coaster in reverse. We did the drop first, and we’ve been climbing back to the top ever since.”

Chris Zaccarelli, chief investment officer, Independent Advisor Alliance 

HW: The market is “backwards”.