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

Friday | September 4, 2020

Hello Eizell.



YESTERDAY: September 3

SPX 3455.06. After 4 days above 3500, we fell hard.

The market opened lower and kept falling until we settled down 3.5% in the SPX and -5.07% in the Nasdaq. OUCH!

The cold bucket of water in the face was inevitable given we just came off of 9 straight days of record breaking new highs. The P/E of the S&P 500 reached 27%, an all-time record last seen at the height of the the DOT COM bubble. We also saw three market leaders (AAPL, TSLA and ZM) reach stratospheric levels with charts that are parabolic – mostly because 2 of them had stock splits. Somehow the media and/or lack of math skills has each new generation produce people that think when a stock splits, free money is made and this time, the free money must have been huge.

Take AAPL as an example. Weeks earlier, the stock was sluggish on news of 5G problems. On July 30th, the company announced earnings, and the stock was at $360. No one cared about the earnings, rather the thing that got people elated was news that the stock was going to split 4:1. That was enough to take the stock to a height of 551.92 ($191 higher) by September2. What did people think was going to happen?

Wednesday, the leaders were being sold by people who can spot a “pig in a poke”. Yesterday, the weak longs had enough pain to also capitulate and sell the stock down $10.52 (-8.0%). Telsa lost 9.02% and Zoom was the big winner/loser at -10%.

This sent the Dow -807.7 points (-2.78%) and the SPX down 3.51% (125.78 points). The Nasdaq? Fo-get-bout-it. It lost 5.07%. Please do not cry. The SPX is still higher by 7% for the year when just a few months ago the world that the world was ending with bodies piled in the streets like cord wood.


TODAY: September 4

TODAY – Another day lower, and then higher again.

LONG TERM – NEW ALL TIME HIGHS (possibly), and then a NASTY trade war sell-off – probably after the election (This one has been here for WEEKS. Nothing changed).


We sold off hard yesterday cleaning out most of the naive gamblers who confuse a bull market with brains. The slow-to-exit people will puke today, and then real buyers can come back.


Sept 29 – Presidential debate #1
October 15 – Presidential debate #2
October 22 – Presidential debate #3

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 -36% for the year (this has been here since January 1).

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
(+6.94% so far)

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