May 12


Market Commentary for May 12, 2020


May 12, 2020

Holding the Line, But for How Long?

From today’s action in the intra-day (15 Minute) chart, it is clear that the resistance-turned-support line is very important.  Now that we have tested it again, the market is indicating an even stronger inclination to continue moving up.  The 23,150 line is becoming our new “Fulcrum” for the market.  What is a Fulcrum?  Rally Above/ Decline Below.  Key levels like this should be obvious over several days of action, and that’s what we are seeing.  As I write this, Dow futures are down about 100 but the night is young.  Just watch this level tomorrow.  Long above, Cautious below.

DJIA – 15 Minutes

The Daily Chart shows the same long consolidation we have seen forming for about a month, with upper boundary at about 25,000 and lower at 23,000.  We still want to watch that lower boundary at 23,000 but the market is still acting as if it wants to rally.  Today’s action gave us a good reason to continue in this thinking.  The wide consolidation implies an ultimate continuation move to 29,000 – which seems improbable given the jobs situation and general state of affairs.  But never underestimate the power of the Fed. (see Commentary below).

DJIA – Daily


I need to repeat a lot of what I said yesterday here. Whenever the Fed pumps trillions into the economy, things should look good for a while.  The question is, “When will the politicians realize getting people back to work is critical” vs. “How many more checks can the Fed write?  When is the end of Corona Stimulus?”  The timing of these two critical drivers is key to the eventual outcome.

We know that in election years, the party in power (either one) will do what it can to shore up the economy.  So it’s quite possible we will see continued stimulus all the way to November.  The market seems to expect this to happen, while also expecting scientists to come up with solutions before the checks run out.  The recovery may not actually happen until 2021 with a lot of elation and despair in between.  If the daily chart is predictive, we will see highs reached in July.  But a lot can happen in a new-driven market.  It’s reasonable to expect breath-taking sell-offs between now and the election.

In this up/down environment, it’s too difficult to predict the final outcome but we have some clues.  The intersection of “end of stimulus” and “pandemic over” is critical to how this all ends up.  We believe the Chart Tells All, and can continue to use key Support and Resistance levels on the indexes to take the market’s pulse each day as it moves forward in this uncertain time.

Ed Downs

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