Yes, The Market Is Still Bullish

February 25th, 2020

Join Chuck and Ken while they discuss the current state of the market on the Money Life Network.


Money Life Interview with Ken Berman


Chuck: Time to talk technical analysis on Money Life. And I’m very pleased to welcome back to the show, Ken Berman, strategist at GorillaTrades, On Twitter, @GorillaTrades. And Ken has been away from the show for a while so I’m very pleased to say Ken Berman, great to have you back on Money Life.
Ken: Thanks for having me, Chuck. It’s always a pleasure.
Chuck: You know normally when I haven’t had somebody on the show for a while, I want to take a long lens but you are a trader and be, the market got a little bit hairy on Monday so why don’t we start there? What did you see going on on Monday and then lets’s broaden that out. What do you see that leading to as we go forward?
Ken Ah, that’s interesting. When I was preparing for this interview over the weekend things look crystal-clear to me. And yesterday happened. The Dow dropped 1000 points. Long-term treasuries are near record highs with the ten-year yields now just a hair above. Its all-time low yield plunging below, what I think, 1.4%, Gold hit another seven-year high. ZIX in a six-month high. So while the major indices still are above their 200-day moving average, which is a good thing, they’re on the verge of a short-term trend change here. It actually dipped yesterday below the f50-day moving average together since the first day in October. But from a long-term tactical perspective, I think a re-test the breakout levels, I think they were just below 3000 on the S&P 500, would be a perfect re-entry point. Which will probably lead to a bearish extreme in investor sentiment too, which is always good.
Chuck: That would be a perfect re-entry point. Does that mean that’s what you expect to happen here?
Ken: Not necessarily. In my mind, the long-term tactical they’re still very bullish. Even with what happened yesterday. Until yesterday, US stocks have been showing incredible resilience. Monetary policies remain easy globally. Treasury yields once again fall sharply. And I think that’s result of the Corona Virus epidemic. At the same time the US economy, you know it continues to be healthy at a healthy pace it’s growing. Additionally, tax cuts 2.0 could provide another bullish catalyst.
Chuck: Well we would take that if we had it. I’m not sure that we’re gonna see that so what’s balance this all out. You’re talking about Monday when a lot of things were blamed on Corona Virus. You’re talking about tax cut 2.0 and we’re in the middle of an election year. So, you’ve got a bunch of things that could be there. Which one or what’s the order of concern for you? The Corona Virus extraneous to the market, but boy can affect a lot of things. Tax cut 2.0 extraneous to the market, but could change things. So, what’s most likely in your opinion?
Ken: It’s interesting. You know, let’s talk about the the possible side effects of the Corona Virus. Even though it’s causing a demand shock in the global economy, especially if yesterday’s news – what new cases in Italy and South Korea. But I think it should be contained. I think it actually might have a positive effect with regard to another major risk factor. You see, the phase 2 trade talks with China haven’t, you know, really begun yet. But a lot of experts warned of a likely failure and a possible re-escalation in the trade war after the US elections. But now, with the already struggling Chinese economy under pressure because of the Corona Virus, I think the likelihood of a broader deal is high. Especially in light of the fact China, what they’re about to decrease tariffs on seventy five billion dollars worth of US goods next week.
Chuck: So, you put it all together and your longer-term outlook, I mean, how do you take a look and say this market, healthy, not healthy, gotta get through stuff. Don’t see this stuff happening before an election year. Do you see it happen before election day I mean how do you forecast this one out?
Ken: You know I’m not one of those guys who plays both sides in saying, you know, this could happen but on the other side this could happen. Simple positive, negative, and cover my tracks either way the market goes. I’m telling you that a long-term perspective, this market still looks very good. I don’t think the ball is over just because you saw a nice correction yesterday. Until yesterday equities have shrugged off so many potential negatives. I’ll just name a few. How about you know continue global weakness, wasn’t a big deal. The conclusion of the the Brexit saga, we forgot about that. The ups and downs in the trade talks that we just talk about with China. The standoff with Iran. Remember this? And you know until yesterday, the Corona Virus outbreak. But the resilience of major industries is so impressive, so impressive to me. It’s signaling a strong long-term advanced trend. It actually could lead to a historic 2020, similar to what we witnessed in 2017, with that rally, after the 2016 breakout.
Chuck: But you’re also a trader. So right now, out of the market waiting for the right signal? Or should people who whether you’re trader not, be treating this kind of decline as a buying opportunity?
Ken: As always, monitoring the leaders of the rally is one of the best ways to gauge the strength of a trend. And currently, at least up to yesterday, the NASDAQ was very strong. Actually it was trading in what I call a runaway bullish trend. The rally, you know, as long as we see a bounce back in the next four to six weeks, I don’t see any problem, without starting to pick at those leaders who have been hit hard.
Ken: You know, corrections always part of the process. But for now, I treat any pullback as a buying opportunity. Last year’s key long-term tactical break out is already reached several of its initial targets, without a question until yesterday.
Ken: Does the surge in volatility though? It could be signaling overdue deeper correction before it’s over, but that would change the underlying bullish trend.
Chuck: Well if it doesn’t change the underlying bullish trend at some point, yep, this turns into something that people can be buying. And if they’re looking for information on those signals and more, they might want to check out your website. It’s Ken Berman, strategist for GorillaTrades. Great to have you back on the show. Thanks so much. We’ll talk again soon.
Ken: Thanks. Thanks for having me again, Chuck.
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