Whoa, there was a big move up overnight in futures, first buoyed by Fed Chairman Powell’s comments on 60 minutes, i.e. “there’s a lot more we can do” which translated means they can print more money and possibly even buy equity ETFs outright. The optimism continued this morning on promising early results in a small scale human trial for a Covid vaccine conducted by Moderna. I welcome the news of a possible vaccine, however we have been this route before with the market overreacting to early stage results. Regardless of a vaccine or not, the macro issues remain that were present before the virus – too much debt, political chaos, and a new cold war emerging with China.
I present to you an updated Dow chart below, showing the big move overnight circled in blue on a four hour chart in order to give broader context.
These are the times in investing when money is made or lost. If you believe the financial media, it is all unicorns and rainbows and we are headed to new highs in a V shaped recovery. Not so fast, I say. This is the psychology of the market, it screams to buy at the worst possible time as the herd stampedes in one direction.
Therefore I am not only continuing to stay short but adding to my positions. We could go a bit higher, perhaps hitting the 61.8% fib line on futures which would equate to about Dow 25,148 (approx. 25,400 in the cash market). Until then, I will sit and wait patiently as earnings continue to collapse and debt increases exponentially.