Stanley Druckenmiller recently came out and said that the market has never been this disconnected from reality - and that the risk/reward has never been this bad.
In an article, a journalist synthesized Ray Dalio's thoughts and research on the state of currencies and the debt crisis. This succinctly represents Dalio's well-documented views:
"The dollar, euro, and yen are in the late stages of their long-term debt cycles. This could mean that, in the near future, our dollars could be potentially worthless. One of the reasons Ray Dalio says we are at the end of a long-term debt cycle is because debt is at an all-time high while interest rates are at an all-time low. This makes holding our currency very risky. We have more and more debt piling up very little return on the dollar. Additionally, large amounts of new debt are being created and monetized with COVID-19. Big devaluations and/or the loss of reserve currency status by the leading reserve currencies would result in the most disruptive economic event we could imagine."
Paul Tudor Jones believes gold will go to $2400 an ounce.
I include these statements because I am looking at what poor risk/reward, the divergence between the economy and the market, a declining dollar, high debt, low interest rates and rising gold prices all offer traders as far as profitable investment opportunities. There are always opportunities if you know where to look.
Last week, we wrote about the clear divergence between the up action in gold and the down action in stocks! Gold closed strong, as did silver and gold miners.
The updated charts I'm showing you of the Economic Modern Family support Druckenmiller's, Dalio's and Paul Tudor Jones' theories.
- The Russell 2000 (IWM) is marginally trading under the weekly channel support line.
- Granny Retail (XRT) is sitting just under the channel line resistance.
- Prodigal Son Regional Banks (KRE) looks the weakest.
- Transportation (IYT) sits in the middle of hope and despair.
- Big Brother Biotechnology (IBB) held the channel line breakout and remains most promising.
- Sister Semiconductors (SMH), like IWM, trades marginally under its weekly channel support line.
In this week's installment of StockCharts TV's Mish's Market Minute, I walk you through my Economic Modern Family, outperforming small-caps, outliers such as the Bonds, the Dollar and Bitcoin, and wrap up with a fresh look at Gold, Silver, Grains, Gasoline and Soft Commodities. Watch here:
- S&P 500 (SPY): 285 pivotal; 278 support, 290 resistance
- Russell 2000 (IWM): 126.75 resistance, 119 support
- Dow (DIA): 229.20 support, resistance 238
- Nasdaq (QQQ): 220 nearest support to hold; 230 major overhead resistance
- KRE (Regional Banks): 30.00 held & must hold; 33.13 is the resistance.
- SMH (Semiconductors): 132 pivotal; 125.70 support
- IYT (Transportation): 140 resistance, 133.00 support
- IBB (Biotechnology): Rallied off the 128 support - 133.60 resistance
- XRT (Retail): 33.50 support, 37.15 resistance
Director of Trading Research and Education