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Prepared by and Scott
Writing under the nom de plume of J.L. LORD

Friday | July 17, 2020

Hello Eizell.




NEWS YO-YO day again. First we had the China trade war / tariff / trade deal soap opera. One day, there would be horrific news that the media made out to be an economy crushing event; then the next day there were reports that things were close to being agreed upon.

Next came the coronavirus fire drill. One day, Dr. Fauci or a politician would get on television saying that millions of people in the US were going to die. The media literally portrayed it as if there would be bodies stacked on the streets for lack of crematoriums. The next day, science would come out and show that the mortality rate was closer to 0.3% instead of 3-5%. This see-saw caused stress and volatility for the markets.


We are now going through the news see-saw of “vaccine or no vaccine”.

Wednesday, the market ran into positive territory for the year on reports that Moderna had a vaccine that created antibodies on all test subjects. Great news, right? Yesterday, the media stated that the antibodies wear off soon, making the vaccines being tested as being a little better than worthless.


The market sold off and tested support at SPX 3200 for 3 reasons:

  1. It was a news “tails” day (not “heads”) with vaccine updates. I guess that means today or Monday it is “good news” (“heads”) day.
  2. China had horrific economic numbers which forced their markets lower.
  3. We have run up so much in the last couple of weeks that a move lower is actually healthy and expected. We have run up 4% since the beginning of July.

Tech stocks led the way lower after Twitter accounts owned by Obama, Musk and other prominent individuals were hacked and asking for Bitcoins.


For the most part, 23 stayed close to SPX 3200 all day, but closed at the high end of the tight range – 3215.57 (-10.99). On paper, it was a very boring day. This was almost obvious and expected as I wrote in yesterday's MORNING COFFEE REPORT. I stated we needed a breather.


TODAY: July 17

TODAY – Higher and consolidation.

LONG TERM – NEW ALL TIME HIGHS (possibly), and then a NASTY trade war sell-off – probably after the election.

Yesterday, we tested 3200 and it held nicely. I suspect we will go higher today, though any bad news would be a great chance to test 3200 again and solidify it as a bottom, but we are on a northbound trajectory. Fed accommodation, low rates, stimulus plans, optimism about a low mortality rate for the virus combined with a slowly opening economy, tons of cash on the sidelines, etc. all make for BIG RUNS higher in our future – despite fears.

I am still standing by my prediction (made December 31, 2019) that we will be positive for the year and making new all-time highs by the end of the year. I maintained this stance even when the SPX was down -35% for the year.

S&P 500 Price Limits

From 8:30 a.m. to 2:25 p.m. CST, there are successive price limits corresponding to 7%, 13%, and 20% declines below the previous trading day’s reference price.

From 2:25 p.m. until the 3:00 p.m. CST close of the cash equity market, only the 20% price limit will be applicable.

Average year with lots of intermittent volatility
(-0.47% so far)

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There was not a lot to do yesterday as we were in a slow moving and tight range. It was an ideal situation for scalping futures, but to put on option trades it was a different environment.



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