Saturday, May 9, 2020
NDX Nazzy 100, COMPQ Nazzy Comp and XLK Tech Sector ETF Daily Charts Turn Positive on the Year
The NDX, the Nasdaq 100, is the first index to recover after the initial coronavirus downdraft and print positive on the year again. Of course it is. You know why. Yes, the FAANG stocks; Facebook (FB), Apple (AAPL), Amazon (AMZN), Netflix (NFLX) and Google (GOOGL). All five FAANG stocks are positive on the year. Traders are throwing fistfuls of money at AMZN and NFLX as folks cocoon at home, some hiding under the bed, in fear of the virus. Humans are watching more television, using the internet more, watching more movies and ordering food deliveries. Comedian Leslie Nielsen was once asked if he ever took risks in life. Leslie paused for a second, for dramatic effect, and said, "Only when I order take-out."
The NDX started the year at 8733 now at 9220 (+5.6%) and topped out at 9648 on 2/18/20. The COMPQ started 2020 at 8973 now at 9121 (+1.7%) and topped out at 9838 on 2/19/20. The XLK started the year at the 91.19 palindrome now at 94.78 (+3.9%) and topped out at 102.94 on 2/19/20.
So the FAANG's pump the NDX to the stratosphere. At the same time, more chips will be needed for this increasingly digital age. Teleconferencing is a common word overnight and it takes lots of chips to make it happen. Interestingly, however, the chips, SOX, are not positive on the year albeit a hair away. The strong semiconductors pump the XLK, the tech sector ETF, higher. SMH and XSD are also not positive on the year albeit a hair away.
Thus, watch the chips to ascertain if the stock market has the juice to rally further. If so, the semi indexes, SOX, XSD and SMH, will turn positive on the year telling you that up is the correct direction ahead. King Donnie will proclaim throughout the land that the virus tragedy is over and there is nothing but blue skies and rainbows ahead.
If, however, the SOX, XSD and SMH fail to turn positive on the year, that tells you the relief rally party is over, the band is packing up, the house lights are turned on, and it is time to go home. The stock market will likely sputter and stall and roll back over to the downside. So will the chips be a chip off the ole rally block and head higher, or, will the chips crack and crumble causing stocks to fall off the cliff?
The COMPQ, the Nasdaq Composite, is the more general tech and biotech-heavy index versus the NDX that is more weighted with the blue-chip tech names. Mr Softy (MSFT; Microsoft) has also catapulted to glory during the relief rally, once again positive on the year, and pumping and engorging the NDX, COMPQ and XLK to swollen heights.
National Economic Adviser Kudlow opines about the depressing jobs number where 20.5 million people were tossed out into the street during the back half of March and front half of April (more to follow) but feigns surprise about the stock market rallying strongly higher. These folks know why stocks are going up and the bad jobs number is great news for stocks as it has been for the past 11 years since former Federal Reserve Chairman Bernanke implemented QE 1 in March 2009. Bad news is good news since it means the Fed will keep printing money like madmen which only serves to pump stock prices higher, therefore, the smart money buys stocks. When good economic news occurs, this is bad for stocks since the Fed will cut back on the printing presses. It is sick but it is our crony capitalism financial system.
In a decade or two, we may look back at that March 2009 date as the actual beginning of the end of crony capitalism in America. Or, perhaps, late 2008 and early 2009, when the presidency was transitioning from George W Bush (republican) to Barrack Obama (democrat), in the midst of the stock market and economic collapse, Bush declared that 'he must destroy capitalism to save it' (Bush provided huge bailouts to companies to prevent the elite class from losing money in the stock market and avoid another Great Depression but in so doing he proved that capitalism only exists in theoretical textbooks and the actual financial system in place in America is crony capitalism). Over a decade after the 2008-2009 Great Recession, and the Federal Reserve's grand Keynesian money-printing experiment is a failure. The hens are coming home to roost; Great Depression redux.
The Fed was unable to create sustainable inflation with their obscene money-printing but did succeed in making the wealthy elite class, their masters, more filthy rich. The increase in money supply pumps stocks higher. Think of it this way. The Fed and other global central bankers print so much money, now it is trillions per month, that you have money laying in your front yard that is 3 foot (1 m) deep. The cash blankets the landscape as far as the eye can see. What are you going to do? Of course you pick up some of that money and buy stuff. You buy stocks, bonds, real estate, maybe a vineyard, art, paintings, perhaps a few classic cars to drive around in and look cool, and so forth. Asset prices in all classes are elevated to historic and epic highs.
The Fed and its partners in crime have destroyed all price discovery in markets. No one truly knows what anything is actually worth nowadays due to 11 years of easy money. The free money is used to buy stocks instead of companies buying equipment or hiring workers. In fact, for many years, companies are buying back their own stock (repurchasing; buybacks) at a record pace. Many businesses have bought back one-third or more of their stock. This allows companies to keep printing happy earnings number making Joe Public believe that the company's metrics are strong. However, it is only sleight of hand financial engineering.
The shameful aspect of the wealthy class raping America is that one-half of the country does not own a single share of stock. "Isn't that special," as the church lady would say. So that humongous stock market rally for 11 years was only enjoyed by the upper middle class and wealthy elite; no one else. The huddled masses have struggled for 11 years, worse than before the Great Recession, and now many will lose complete hope in the new Great Depression.
The privileged elite, that control the laws and direction of the US crony capitalism system, then have the gall to complain about the taxes they pay. That's rich. Americans should be happy that crony capitalism is on its way out. After a decade or two transition, likely with plenty of riots and social unrest a la the 1960's, America will end up in a better place, probably a socialism-lite type structure, but at least it will be a fair financial system that can provide opportunities for all Americans.
The Fed members and other government officials that worship the Keynesian money-printing methodologies and pursue the Wall Street investment bank's agenda's because they are rewarded with lucrative speaking engagements once they leave public office. Wouldn't you be a dovish Fed member always wanting to print money (to send the stock market higher) since you know in a few years when you exit the Fed you will be invited to speak at token luncheons receiving $200K a pop. Look at where all the ex Fed members and corrupt banksters live; luxurious McMansions. They all sold their souls. This is the quid pro quo in America's wonderfully corrupt crony capitalism system.
The action is in the FAANG's and chips so watch the tickers above to determine market direction forward. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.