What follows are the topics covered in this weekend's note to subscribers. To become a client of Zenolytics Turning Points or to learn more click here.
The excerpt from last weekend's note is available here.
In this weekend's 11 page note we discuss:
- Fed's new inflation policy and what it means for equities moving forward.
- How to handle coming resistance levels in Nasdaq and S&P.
- A forecast of what September trading should look like.
- Detailing a rotation based trade with significant upside and little risk into year end.
- Further research on a new portfolio holding introduced last week.
MARKET UPDATE
The failure of the bears to make even a slight dent in August trading sets the tone for the remainder of 2020. That tone is decidedly bullish, with very little in the way of downside volatility to take place. Moves to the downside should be no greater than 5% into December.
The backstop for continuing persistent buying support for the market is based on the following:
1. Fed policy now forcefully weighted towards an inflationary outcome after this week's announcement. Stocks and real estate have significant upside for possibly years to come, as cash becomes worthless under such a scenario.
2. There remains a significant amount of cash sidelined that needs inflation protection. Inflation protection can only come via investment in stocks, real estate, precious metals etc.
3. Performance chasing via underinvested fund managers is just beginning. With the S&P nearing the double digit percentage gain mark and the VIX about to fall through 20, the performance chase is set to intensify.
4. Earnings in October/November for Q3 will continue to be impressive, leaving little in the way of the excuses to not be invested. The cat is already out of the bag with respect to this, providing a supporting bid to equities on any weakness whatsoever into Q3 earnings reporting period.
5. There remains a vast contingent who believe somehow September/October have to be weak due to seasonal factors. Seasonals have been irrelevant for all of 2020 and they will continue to be irrelevant. This market is functioning according to its own set of rules during a very unique period in time.
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