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

Friday | July 24, 2020

Hello Eizell.




The market opened and tried to extend its gains. Tesla had just reported its earnings and people were optimistically buying it, getting share prices up to 1689. At the same time, some reporters were claiming that the earnings numbers were manipulated. This, along with the extinguished buying on the open, saw the stock turn around and head south.

At the same time, AAPL was falling. Despite Tesla and AAPL falling, the market tried to stay near the unchanged line. There was a lot of underlying strength in the overall market to hold up under the pressure of both of these big names falling.

It was not until the pressure of AAPL falling more than -$7 and TSLA down -$15 at 11am Chicago time that the SPX just started to capitulate. As the day went on, AAPL continued its descent as analysts came out criticizing the company, and AAPL announced it had another delay in release of a 5G phone.

One needs to keep in mind that AMZN, AAPL and MSFT are so large that these three companies combined account for $5 trillion in market cap. That is larger than the economy of Japan or Germany. When one of these names gets hit hard, it is going to take the market lower.

At the lows, AAPL was down more than $20, taking the SPX below its support of 3233, and playing with 3222. The rest of the day, the SPX floated between 3222 and the previous support line of 3233, a $10-point channel.

In the MORNING COFFEE report for the last 3 weeks, I have been pretty hot with my preconditions. Yesterday, I got it wrong, though I did warn the advances higher would not be straight lines anymore.


TODAY: July 24


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

Fridays tend to be strange. It is common for selling to occur as people lighten up on their risk prior to the weekend. The SPX did close above the critical 3233 level, which is bullish. Yet, we have not recently had a decent dose of fear and reality check of being in positive territory for the year. I have no idea if the market's underlying strength or fear wins out today.

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
(+++++0.15% so far)

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