Morning Note

The headline this morning reads:

“Dow futures slump 240 points on COVID surge and trade tensions”

As I type the Dow future contract has made back 70 of those points, down 170ish now. Who knows where it’ll be by the time I hit the publish button…

Yeah, lately, especially in the overnight session, the swings have been utterly remarkable. I’ve seen triple digit moves in both direction literally in a matter of seconds, multiple times, with no explanatory headline in sight.

So what does that seemingly intense volatility mean? Well, of course, it doesn’t matter to the thoughtful investor with more than a 2-minute time horizon, but to answer the question, it means that there’s an intense ongoing battle afoot among bull and bear traders with less than 2-minute time horizons. And I suspect there’s rapid defections going on minute by minute between both camps. Then again, there’s the popular conspiracy theory that U.S. government operatives have infiltrated the futures market and are, presumably through international proxies, actively keeping a floor under U.S. equities. Would that result in intermittent bouts of intense volatility, i.e., bears pounding against some strongly reinforced resistance zone? Who knows? Not my base case, by the way…

New headline just crossed my screen:

“IMF slashes its forecast for the global economy and warns of soaring debt levels”

Well, if that’s not an echo of virtually everything you’ve read from me over the past year+, I don’t what is. And, by the way, that’s a headline that is indeed important to the thoughtful investor with more than a 2-minute time horizon.

Asian stocks were mixed overnight; 7 of the 16 markets we track closed in the red. European equities are taking it in the chin virtually across the board (they say on Trump threatening fresh tariffs), and the US is staring down a red opening for every major index.

The VIX (SP500 volatility) is up nearly 4%.

The dollar’s rallying this morning. Gold’s off $8, silver’s down 2%, copper’s up .6% and the ag complex is mostly in the green.

I’ll leave you this morning with the last line of the quote I featured in last evening’s note. It’s an ominous one, but it’s one, given current conditions and the complexion of markets, I can’t help but presently sympathize with:

“It’s a bubble, pure and simple. It’s driven by the Fed, it’s driven by liquidity, and it will end very badly.”

Have a great day!


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