Markets at inflection as no love lost between Trump and Pelosi
Abraham George Macro View
Never in recent times have we seen a public display of contempt and disrespect for one another from two opposing parties as much as shown by the President of the United States and the Speaker of the House. At the last State of the Union speech, President Trump refused to shake hands with the Speaker of the House Nancy Pelosi. Pelosi was a bit rattled and when the speech was over, in protest she tore the whole hard copy of the speech in front of all spectators to show her displeasure. There is no love lost between the President and the Speaker of the House.
We have been writing for sometime that the mail in voting issue at this time of the pandemic will be a clear winner for the Democrats if it is passed by both the Houses.
When both the Houses are in a recess for the last two weeks of August, Nancy Pelosi has called the House back into session to vote an emergency USPS bill that will be surely ignored by the Senate when they get back to work. This is something like Trump’s impeachment.
What must have forced Pelosi to make this SOS call and ruin Congress’s vacation must have been based on some comments President Trump made on Fox Business interview that he is starving the agency to impede mail-in ballot. Pelosi wrote to lawmakers “lives, livelihoods and the life of of our American democracy are under threat from the president”. Therefore please come back to Washington to save the situation.
We think it is a futile exercise as it will get stalled in the Senate where the Republicans have the majority. However, Pelosi has to make a point as it is just ahead of a major election which will have major global ramifications too.
We think all the major asset classes that we follow are at an inflection point. From a pattern perspective, everything is lining up for a change in direction. Let’s look at each of them in more detail.
Equities
The Dow and Nasdaq showed totally different characteristics. Very rarely have we seen these sort of divergences. The Nasdaq at the open opened with a gap and continued to push higher till the end of the day. While the Dow opened at the high and declined throughout. While the S&P 500 displayed one of the narrowest range for the day at 8 points exceeding the previous narrow range of 5.5 points of last year just before Christmas.
What is surprising is the S&P 500 is still unable to make a stab at the Feb 19 high of 3393.50.
Bonds
Think the move down from 183^06 must have completed one leg of the phase and the current correction can top out anywhere between 179^25 to 181. The next leg of the down move should see much stronger momentum.
Euro
We believe the high on Aug 06 at 1.1916 is significant or there could be one more high as the patterns are getting very complex but our larger focus is for weakness in Euro.
Gold
The counter trend rally in gold from 1870 is closing in on 2000. There is a gap that exists up to 2014. There is a possibility that could be filled.
Gold’s recent strength could be a lot associated with Buffett’s interest in buying gold mining stocks after shunning gold through out his investment career. A break below 1930 will be the first sign that a move down could be starting.
Abraham George is a seasoned investment manager with more than 40 years of experience in trading & investment and portfolio management spanning diverse environments like banks (HSBC, ADCB), sovereign wealth fund (ADIA), a royal family office and a hedge fund.