'Too Early For Victory Laps': Stock Market Update For The Week Ahead

Market Trading EssentialsSeptember 20, 2020

3 minutes read

The Past Week, In A Nutshell

noted Charlie Ripley, Senior Investment Strategist for Allianz Investment Management.” data-reactid=”30″>Remember This: “The Fed essentially acknowledged they were a bit behind the curve with their forecast on the economy, as projections needed tweaking to reflect the current path of the recovery,” noted Charlie Ripley, Senior Investment Strategist for Allianz Investment Management.

“However, with near-term risks to the outlook still intact, the Fed continues to reiterate that it is too early for victory laps on the economic recovery. On the horizon, the path of the virus, the upcoming election, and the motivation for additional fiscal stimulus are all hurdles the economy needs to overcome.”

Technical

Broad-market equity indices ended the week lower with the S&P 500 correcting to $3,280.

progress in COVID-19 vaccine development, on Monday, participants rejected the prior week’s low, establishing value higher on a gap. Ahead of the Federal Reserve’s two-day meeting, Tuesday’s session confirmed the upside directional conviction, trading up to a multi-day ledge formed by mechanical sellers. In light of Fed statements, after the ledge proved resistive for two days straight, the market liquidated through Friday’s session, testing and accepting value near a low-volume area that formerly denoted directional conviction to the upside.” data-reactid=”56″>Recapping Last Week’s Action: Alongside progress in COVID-19 vaccine development, on Monday, participants rejected the prior week’s low, establishing value higher on a gap. Ahead of the Federal Reserve’s two-day meeting, Tuesday’s session confirmed the upside directional conviction, trading up to a multi-day ledge formed by mechanical sellers. In light of Fed statements, after the ledge proved resistive for two days straight, the market liquidated through Friday’s session, testing and accepting value near a low-volume area that formerly denoted directional conviction to the upside.

concerns and acceptance of value below a composite high-volume area, confirms the near-term change in conviction. That said, indices keep testing the low-volume area below $3,320. Acceptance within the low-volume area may foreshadow a test of $3,270, the next-closest high-volume concentration which could slow prices enough to allow responsive longs entry at more favorable prices.” data-reactid=”57″>Overall, the market’s weakness on economic concerns and acceptance of value below a composite high-volume area, confirms the near-term change in conviction. That said, indices keep testing the low-volume area below $3,320. Acceptance within the low-volume area may foreshadow a test of $3,270, the next-closest high-volume concentration which could slow prices enough to allow responsive longs entry at more favorable prices.

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Fundamental

suggested rapid money supply growth will worsen the deflationary bust.” data-reactid=”60″>Albert Edwards, chief investment strategist at Societe Generale SA (PINK: SCGLY), suggested rapid money supply growth will worsen the deflationary bust.

“Why? The flipside to looking at money supply growth is to look at its counter-parties on the asset side of the banks’ balance sheets. It is clear that the main driver for the recent explosive 25% monetary growth has been bank lending to industrial and commercial companies, which despite only comprising a quarter of total bank lending has contributed some 70% of the total rise in lending over the past year, surging 30% yoy. One thing we now know for sure after Japan’s lost decade: keeping zombie companies alive with “extend and pretend” bank loans creates deflation, not higher inflation.”

Simply put, indebtedness and malinvestment in unproductive activities will lower the economy’s growth prospects.

Key Events

Monday: Chicago Fed National Activity Index, Fed Brainard Speech, Fed Kaplan Speech, Fed Williams Speech.
Tuesday: Existing Home Sales, Fed Evans Speech, Fed Chair Powell Testimony.
Wednesday: MBA Mortgage Applications, Fed Mester Speech, House Price Index, Markit Manufacturing PMI Flash, Fed Chair Powell Testimony, EIA Cushing Crude Oil Stocks Change, EIA Distillate Stocks Change, Fed Evans Speech, Fed Quarles Speech.
Thursday: Initial Jobless Claims, Continuing Jobless Claims, Jobless Claims 4-Week Average, Fed Chair Powell Testimony, New Home Sales, Treasury Secretary Mnuchin Testimony, Fed Evans Speech, Fed Williams Speech.
Friday: Durable Goods Orders, Fed Williams Speech.

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