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

Wednesday | June 17, 2020

Hello Eizell.

YESTERDAY'S CLOSING PRICES

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YESTERDAY: June 16

The market jumped dramatically on the open because the Fed announced the previous day that they were buying corporate bonds, and the steroid dexamethasone stops many coronavirus deaths – way more than the hydroxychloroquine promise.

One hour after the open, Fed Chair Jerome Powell started to speak and was greeted with the same love he usually gets. Like an abused Stockholm syndrome patient, Mr. Powell keeps coming back for more talks despite the market falling after almost every time. He is a bright guy. He has to know it is an indication the market has no faith in him – right or wrong.

Personally, I would hang out in the board room eating foie gras and Dom Perignon and slide the monthly interest rate decision under the door before heading to the Hamptons. He is trying, though.

The market wiped out 76 points in the SPX quickly, before bouncing back again. The rest of the day was spent with SPX bouncing its head off 3,140. Travel stocks did decent returns, but it was the FAANG stocks that traders fell in love with all over. The Dow closed up 526 points and the NASDAQ closed higher by 158 points.

Other than selling the overdone open, which I missed, I didn't see a lot of things to do. If in fact, we are close to an existing cure for the virus and the Fed is buying everything not nailed down, this market should have been higher than 500 points. It almost made me nervous about the downside, so I mostly sat on my hands.

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TODAY: June 17

TODAY – Tough call...

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

It is a tough call. The trend is bullish. The fact that the Fed is buying everything not nailed down is bullish. Interest rates are near zero – more bullishness. We might have a cure for what shut the world down – very bullish.

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Yet...

Go into the average trader's head. Go past the portion of the brain that is greed and logic. Go past the portion of above average math skills. Then peel another layer of the onion lower past PornHub and luxury cars. Below that you will find the area of the brain the controls skepticism. This is a very primitive portion of the trader's brain, but one that is constantly lurking like fear and greed.

Every trader worth his salt has to be thinking “What does the Fed know that they are not saying?” If we are recovering, and the corona recession is not going to be as bad as expected, and we are starting to open again, why buy corporate bonds? Maybe I will look at the man behind the screen to see who it is?” It is this concern that has to be on the minds of traders, and ready for them to hit the BUY PUTS button.

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.

2020 ONE-YEAR PREDICTION:
Average year with lots of intermittent volatility
(-3.28% so far)

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POT Class:

LAYER SPREADS TONIGHT ! ! !

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