Putting the pieces together...

This is an interview of Mike Taylor, Hedge fund Manager (Critical Mass Partners) and originally educated at Johns Hopkins in virology with lab research on earlier Covid viruses. Keith McCullough, co-founder and CEO of HedgEye is the interviewer. It's a fabulous interview covering the current pandemic cut also how to invest at this time. The connection may not work in all browsers. In it doesn'rt work for you, do a seach on DuckDuckgo for the interview or seach on-line at Hedgeye.com.

https://app.hedgeye.com/insights/82810-michael-taylor-a-hedge-fund-manager-s-unique-investing-outlook-hed

UPDATES

The retracement upwards from the late March dreadful low in the S&P 500 is not guaranteeing a complete recovery anytime soon. Nearly every bear market which starts out so drastically has an initial retracement of 25 to 75%. In longer bear markets like 1929-1932 there can be several such retracement rallies.

Likewise, the point and figure "Gann square" chart is not predicting all-time highs lie directly ahead. It is a history. But it is very informative in showing how regular and persistent the bull market since late 2015 has been. $GOLD is the day price of gold as measured by XAUUSD which is available on many trading platforms live intraday. I use InterActive Brokers,

 

Two Charts of the DJIA

The first chart was sent by the son of the founders the Mc Clelland oscillator. I added the purple lines to show a formation which has interested chartists for 100 years or more. Sometimes it was called a Broadening Top. Welles Wilder, who developed a lot of indicators used every day by chartists, called it a Reverse Point Wave. A friend of mine, known as G9, noted that when the formation got to the fourth point, which in this chart was Christmas Eve of 2018, there was approximately an 80% chance that it would reverse and make a fifth wave top above the third. 

In the example shown here there was a higher  top in August 2019, but after a rest the market drove even higher into first quarter of 2020. The recent collapse into yesterday created what might be a sixth point which also could reverse upwards again. I have seen several seventh wave tops over the years. It can happen. Often however the seventh wave retraces only a part of the sixth wave and often it will do a Fibonacci segment of the previous wave ass shown in the second chart.

No promises, of course, but keep the formation in mind. It can and does work it many time frames from one minute to yearly chart bars.

Volatility

Fascinating S&P 500 Chart

MacroCharts published this chart showing 11 instances of large drops of S&P on Fridays followed also by large drops on Mondays. All were bottoms or bottoms that were soon retested. The examples were 1987, 1990, 1997, 1998, 2001, 2002, 2008, 2009, 2011, 2015, 2018, and possibly right now. A good cyber friend directed me to this chart.

The new chart shows why a pullback to +/- 1500 is possible.

I won't go into Elliott, Gann, and macro-economic issues today, but I suspect there could be a pullback perhaps as far as 1500.

Covid19 Epidemiology 1

Right up front I have to say I haven’t practiced epidemiology for half a century. But I was trained by Dr Alexander Langmuir at CDC when I was an MD officer in the USPHS, and I did epidemiological field work on measles, which was a major cause  of death in children in urban and rural West Africa, and smallpox.

Analyzing a disease is like analyzing any sick patient and getting to a diagnosis. Individual diseases spread in many different ways: from leprosy (close longer term physical contact); HIV/AIDS (sexual or needle contact); malaria (mosquitoes); rodents (plague); many GI diseases (fecal-oral contamination); airborne (influenza and many viruses); and many more diseases and modes.

Covid-19 appears to be largely, although not exclusively, spread via the GI tract rather than as an airborne pathogen like influenza. So the epidemiology is quite likely different. At very short distances from an ill person who is coughing, one could inhale enough Covid-19 virus to become infected, but I see that not being the major route of spread.

Therefor cultural differences and occupational differences will determine infection rates and illness rates far more than with influenza.

Poor sanitation and “touchy-feely” cultural or personal habits primarily will determine spread rates and infection rates and hence numbers of deaths.

Frequent hand washing, cooking your own hot food, avoiding kissing as a normal greeting, and maintaining some space from other people in public should go a long way in reducing the disease and its spread.

I think most writers on the subject I have read, and I have certainly NOT seen them all. are not competently trained epidemiologists and are therefor overestimating morbidity and mortality rates and time rate of spread.

Now, it’s possible that the major modes of infection noted to date may be proven wrong, but probably not in my opinion.

After FED meddling day, it's quite choppy. The Fibonacci and Gann square lines hold gold fairly well. It's not random.

I'm still on the gold wagon on a rocky road.

Lots of resistance here in this cash gold price range in various time period charts. Barrick Gold has traded over 16 million shares so far today.

Recent Markets

London spot gold XAUUSD recently spiked to 1611 which was a Gann square target. 1540 could be about it for the pullback on a close basis. The fundamentals are primarily the nearly worldwide short term zero or below real (inflation-adjusted) interest rates.

 

Gold has been up in nearly every national currency. In the 1970's it was common for gold bulls to refer to the daily advance/decline in all currencies. Of course, we don't have very many currencies left now since the Euro was born in 1990. The Yuan does not float so it doesn't count. The Swiss franc may become important again since it was removed from its peg to the Euro today.

Of course, inflation is picking up a bit in the past 3-4 months, so rates may be rising a bit. But gold will still find mostly zero or less real short term rates and will not  likely be negatively impacted.

I have been invested in long term US Treasury during the past year, but I am now on the sidelines.  Also many analysts feel that corporate  bonds will be highly impacted--negatively-- in any recessionary environment since the credit rating of US and world corporate bonds has declined considerably.

One alternative is US Government-insured mortgage bonds, which Grundlach and others have boosted. US mortgage REITs area convenient way to own them, and they large dividends. Read up on them before buying any. They are considered hazardous  by many after a nearly ten year bear market. There are two mortgage REIT etfs available in the US, REM and MORT, who own 15-25 of the more prominent mortgage REITs.

Cash gold XAUUSD has remained in a bear flag pattern since early September 2019. There's a risk that a weekly close under 1470 at this time could change the P & F picture to negative.

N.B.: End of day closing cash price for gold which is $Gold on Stockcharts and XAU.USD on London Futures cash closing cost gold price was only $22 from a longer breakdown or consolidation on the Point and Figure chart recently posted..

The GLD etf on NYSE with its continuous intraday PRICE was on 56 basis points from the same breakdown at 136.50.

20 year break-even inflation (RINF) says upward, and so do bonds. The dollar is a puzzlement.

Another Chart

From the Edelson Institute, run by Sean Brodrick since Larry Edelson's death. Chart based upon the Tarasov artificial intelligence program. This suggests a pullback as does overhead résistance and the P and F chart. I have cut back in "paper gold" last week, but not in the real stuff.

 

GOLD

Gold remains positive  largely due to lower dollar real interest rates. Real rates have been falling greatly in the disinflationary environment of the past year, and for most of the time since 2012,  but real rates can fall during inflation as well. The late 1970's was a classic example.

The charts show long term possible resistance at ~1550. Gold has several times in the past few months tested the 50% point of the long 2012-2015 bear market at ~ 1483.50. The leg up from 1225 has slightly exceeded the leg up from 1050 to 1365.

Obviously there are other assets than gold to invest in, and most people don't even carry much gold in any portfolio. But if we shift back into iinflation, higher rates and a lower dollar, stocks and bonds may not work too well on the long side. With all central banks of major economies into the "Brave New World" of printing soverereign bills, notes and bonds as needed, it's not your grandfather's market. Commodities and precious metals and selected real estate will make a comeback "in due course". Not to worry or hurry but to be aware is a good idea.

Stand by for takeoff.

What to do? Buy assets that benefit from falling interest rates: REITs, housing stocks, utilities, gold, and, of course, Treasurys. NOT corporate bonds or generic stocks which we should be out off or short. Since many US oil and gas companies need cheaper money, they may also rise.