Stocks Stage Rally On Wall Street; Chinese Trade War Seems Frozen

Commenting on today’s trading Gorilla Trades strategist Ken Berman said:

The major indices finished mixed and flat, as stocks staged an impressive afternoon rally following a sharp opening dip on Wall Street. The Dow was down 22 or 0.1%, to 26,007, the Nasdaq gained 30, or 0.4%, to 7,863, while the S&P 500 rose by 2, or 0.1%, to 2,884. The number of advancing issues roughly equaled decliners on the NYSE, where volume was above average again.

Get The Full Series in PDF

Get the entire 10-part series on Charlie Munger in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues.

Q2 hedge fund letters, conference, scoops etc

Qualivian Investment Partners Up 30% YTD; Long ORLY Thesis

Qualivian Investment PartnersQualivian Investment Partners commentary for the second quarter ended July 30, 2020. Q2 2020 hedge fund letters, conferences and more “Short-term investors will accept a 20% gain because they didn’t spend the time to develop the conviction and foresight to see the next 500%.” - Ian Cassell Executive Summary Readers of investment letters fall into Read More

Today’s recovery has to be encouraging for bulls, since it would be hard to point out a positive catalyst behind the move. Stocks turned higher out of nowhere today, even though the frontlines seem to be frozen in the U.S.-Chinese trade war, and that could mean that as the initial tariff-shock passes, the better-than-expected earnings will be back at the center of attention of investors.

Even though major indices looked ready to continue Monday's plunge, bulls stepped in to buy the dip yet again, confirming the resilience of the bull market. Despite the carnage in the first hours of trading, several key sectors turned positive in the afternoon, and tech stocks and consumer-related issues were the clear winners of the rally. Financials and large-cap banks, in particular, remained weak throughout the session, as declining Treasury yields continue to weigh on the sector.

The bond market saw even more activity than the stock market in recent days, and the U.S. yield curve turned fully inverted today, due to the trade-panic. While this week's historic moves in global government bond yields reignited the premature speculation regarding the possibility of negative U.S. Treasury yields, domestic rates are still well above the zero level. With the whole German yield curve now being sub-zero, it's not impossible that we will see negative Treasury yields in the coming years. For that to happen, a full-blown global recession would likely be needed, and currently, the domestic economy is way too stable.

While stocks and other risk assets rebounded towards the end of the session, and the main safe-haven assets, remain in very strong technical positions. Gold has been especially bullish in the past few days, and the price precious metal closed at its highest level in more than six years. Although gold miners, such as Newmont Goldcorp (NEM) and Barrick (GOLD) have also been performing well, valuations in the sector are still low in the wake of the multi-year bear market. Should the price of the commodity continue higher, the sector could be among the winners of the coming months.

We will have another quiet day of domestic economic releases tomorrow, ahead of Friday’s Producer Price Index (PPI), but the weekly number of new jobless claims will be closely watched by investors. The number of claims continues to hover just above 200,000, which is very low at this stage of the cycle, and analysts expect a reading of 215,000 this week. The Chinese trade balance will also be out overnight, and in light of the recent trade-related developments, it could set the tone of the day. Stay tuned!