Stocks ended the week higher as the robust rally continued on Wall Street. The Dow Jones Industrial Average joined the S&P 500 and Nasdaq Composite and turned positive for 2020 as the major indices continued to race higher. In the short-term, the market remains extremely overbought and way overdue to pull back. The inability to pull back speaks volumes to how strong the market is right now. Stepping back, major indices, and a slew of leading stocks, would do well if we get a nice pullback into the 10, 21, or 50 day moving average lines. Just because the market hasn’t pulled back yet – doesn’t mean that it will not pull back. Stay alert and wait for that pullback because if it is another healthy short and quiet pullback then it will become another great buying opportunity. Until then, we are long and very comfortable.  

Monday-Wednesday’s Action:

Stocks rallied sharply on Monday as investors continued to buy stocks. The RNC convention started and on Sunday, the U.S. Food and Drug Administration issued an emergency use authorization of convalescent plasma for hospitalized Covid-19 patients. The treatment uses blood plasma donated by people who have recovered from the virus and it appears to be working well. Stocks ended mixed to mostly higher on Tuesday after the Dow Industrial Average announced it will add Salesforce.com, Amgen, and Honeywell and they will replace ExxonMobil, Pfizer, and Raytheon in the biggest Dow shuffle in years. The Dow fell on the news while S&P 500 and the Nasdaq rallied. The market rallied nicely on Wednesday as the Nasdaq continued to lead the broader indices higher. In other news, Hurricane Laura was upgraded to Category 4 as it strengthened in the Gulf of Mexico and made its way to Texas-Louisiana area.

Thursday & Friday Action:

Stocks ended mixed to mostly higher on Thursday after Federal Reserve Chairman Jay Powell announced a major shift in policy at the annual Jackson Hole summit. Powell changed the way the Fed views inflation from a hard target of 2% to an average target of 2%. Put simply, that means the Fed can keep rates lower for longer, even if inflation passes 2% at any given time. Additionally, the Fed changed how it views employment and will now focus more on lower paying jobs. Stocks rallied on Friday.

Market Outlook: Flood The System With Liquidity 
Global governments and global central banks stepped in with massive rate cuts and other “aid” packages to help “stimulate” both Main Street and Wall Street. So far, it is working as intended. As long as March’s lows hold, the market will likely move sideways to higher. On the other hand, if March’s lows are breached, then look out below. As always, keep your losses small and never argue with the tape.