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

Monday | August 3, 2020

Hello Eizell.




In the Friday's MORNING COFFEE REPORT, I stated that we would have a “buy the rumor and sell the fact day”. What I didn't realize is how fast the market would catch on. Are traders reading this report? I did not expect the media and traders to catch on as fast as they did.


The market opened higher with the Minis in the +$6 area. They immediately sold off, and by the first 30 minutes, we were unchanged. From there, the SPX fell to its lows of (-25.96 net) 3220.26. This was enough below the unchanged line for the year of 3233 that it caused some concern.

The 4 largest equities the market looks at (AAPL, FB, AMZN and GOOGL) all had great earnings. Why were we selling off? We hit these lows by noon Chicago time before stabilizing.

After that, the market started to climb despite the democrats in congress going home with no resolution on the short term $600 a week proposal republicans made for continued covid benefits. Certainly this was not good news; however, the market started to climb on that.

The last 90 minutes of the day saw the market do a moon shot to climb to 3271.12 in the SPX.

The net change range in the SPX was a strange -25.96 and +25.95.


TODAY: August 3

TODAY – Higher.

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

I can not see a reason why we should NOT moonshot higher from here. As the world holds its breadth to see which black woman Biden will pick for VP, when the second wave of covid is going to hit, which drug company will have a vaccine, etc., the real issues are clearer. What is the Fed doing? How is the economy? And how much cash is on the sidelines?

Answers: Everything they can, decent lots. The other question is, “What would surprise people the most (higher or lower). This is the most hated bull market in history. We have been playing with the unchanged line for a month, and that has people shocked. For us to go higher by 2, 4, or 6% from here would shock people-especially before the election in 90 days. Thus... because people are not expecting higher, I am going to say HIGHER.

I can't wait to hear this quotes (with no credit to Stratagem) on TV 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 -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
(1.25% so far)

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