What’s With Gold And The Dow Jones In Late September?

This didn’t happen, but only because the FOMC flooded the financial system with “liquidity”, as seen in the table in my chart of M1 above. Since Barron’s first issue for 2020, in just the past nine months:

  • M1 has increased by 38.15%
  • CinC has increased by 12.32%
  • The Federal Reserve’s holdings of US T-debt has increased by a whopping 72.15%

So, exactly as the FOMC purchased sub-prime mortgages in 2008-09, at prices everyone else refused to pay, in 2020 these idiot savants began purchasing corporate bonds at prices everyone else refuses to pay, using pure monetary inflation to finance their purchases. 

If you wanted to know the actual financial condition of the S&P 500 companies, and in the thirty Dow Jones companies, the best guess I have is that in all too many cases they stink. In other words; well-known companies whose products and services familiar to all are having difficulties servicing their debts without the assistance of “policy makers” supporting their bond valuations.

 With the FOMC “supporting market valuations” as they have for well over a decade, the bulls running wild and free on Wall Street remain fat, dumb and happy. I know not when, but one day in the not too distant future will be Mr.. Bear’s, and in it you’ll be happy to own gold and silver bullion, and shares in the precious metals miners (GDX).

Oh, and what about whether the Dow Jones will see a plus 10% correction in the weeks and months to come? With the world as it now is, don’t ask me as I haven’t a clue whether it will, or even if the Dow Jones is going on to new all-time highs from here, which it could. The only thing I can say for sure is I want no exposure to the financial markets as 2021 approaches as I see monumental risks and pathetic rewards for retail investors betting on Wall Street.

Next are the BEV values for the major market indexes I follow. There were some new all-time highs (BEV Zeros) on September 2nd, but none since. And some of these former high flyers, such as the NASDAQ Composite (#11) and 100 (#12) deflated by double digit percentages this week. The Dow Jones (#7) closed the week with a BEV value of -8.05%.  It’s encouraging seeing the spread between the XAU (gold and silver mining) and the NASDAQ Banks (#19&20) widening.

I remain very positive on the XAU as well as gold and silver bullion. I wouldn’t be surprised seeing the XAU at the #1 position in the table below before 2021 arrives.

In the market indexes performance table above, the XAU remains in 1st place.  What’s with the Dow Jones Transports at #2?  Must be UPS cleaning up delivering all the stuff people are buying from Amazon (AMZN).

This week saw two extreme market events; two negative NYSE 70% A-D days or days of extreme market breadth, as seen in Mr. Bear’s report card below. I’m not going to make much about this except to say the stock market felt the hot breadth of Mr. Bear on the back of its neck on Monday and again on Wednesday this week.

 

What’s odd is the Dow Jones didn’t see a 2% day on Monday or Wednesday as is usually the case. We’ll know when Mr. Bear is once again active when once again we see an increase in these extreme days in the market. A rising 8 count is NEVER a positive for the stock market. Currently the Dow Jones’ 200 count contains 47 very stale Dow Jones 2% days from last winter / spring’s 37% market decline, and doesn’t indicate much of anything in our current market. And as noted before, the Dow Jones BEV value has yet to descend to double digits.

Here’s the Dow Jones in daily bars. The Dow Jones could turn around and advance in the weeks to come, but right now the venerable Dow is looking a bit weak. Stating the obvious, if the Dow Jones is to advance from here, it’s has to stop going down as it has for the past three weeks.

But one way or the other, whether the Dow Jones continues deflating or begins to advance into market history is purely a spectator sport for this guy. I just enjoy looking at the FOMC and Mr. Bear duke it out on Wall Street in the chart below. But if I were to make a market bet at my local bucket shop, I’d bet a nickel on the FOMC that the Dow Jones is still good for a new round of all-time highs sometime in late 2020.

C:\Users\Owner\Documents\Financial Data Excel\Bear Market Race\Long Term Market Trends\Wk 671\Chart #4   DJIA OHLC.gif

Next is my comparison between the Great Depression crash and our market decline. I began publishing this chart last April or so to see whether the advance of last spring and summer was an advance to new all-time highs for the Dow Jones or a dead-cat bounce; aka a sucker’s rally as was the case for the 1929 to 1932 89% market crash.

Well, as September rolls into October, beginning to believe the bounce by the Dow Jones off its lows of last March is in fact a sucker’s rally is looking more likely. Of course all the Dow Jones has to do to stop me from pointing out the similarity between these two bear markets is for it to go on to new all-time highs.

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Disclosure: None.

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