AN IMPORTANT SPEECH BY POWELL AHEAD — WILL HE SPIKE THE STOCK MARKET A INFLATION? $AMGN $CRM $DIA $DJIA $GDX $GLD $HON $NDX $QQQ $SLV $SPX $SPY

To gain an edge, this is what you need to know today.  

Powell Speech Ahead

Please click here for an annotated chart of Dow Jones Industrial Average ETF (DIA) which represents the popular stock market index Dow Jones Industrial Average (DJIA).

Note the following:

  • The chart shows that Dow Jones Industrial Average is the only major stock market index that has not yet made a new high. The two other stock market indexes S&P 500 (SPX)  represented by S&P 500 ETF (SPY) and Nasdaq 100 (NDX) represented by (QQQ) have already made new highs.
  • The chart shows expansion of the Fed’s balance sheet from $0.87 trillion in 2007 to $7  trillion on the way to $10 trillion. This is a fancy way to say that the Fed has been printing a lot of money.
  • This money printing, lowering of interest rates and massive borrowing by the government are the primary factors behind the stock market rise.
  • The government says there is no inflation.  Have you gone to the grocery store lately?
  • The Fed is fixated on the Consumer Price Index.  The Fed has totally ignored major inflation in the stock market, bond market and real estate.
  • These Fed policies have been the major contributor to rising income inequality.
  • Fed Chair Powell will speak tomorrow at virtual Jackson Hole conference.
  • Powell is likely to describe a new inflation framework.
  • The Fed is likely to take steps to ignite inflation.
  • The Fed is likely to tolerate a much higher level of inflation than the prior policies.
  • With the Fed wanting more inflation, Powell’s speech has the potential to spike the stock market higher. Of course this is what the Fed has done all along.
  • In theory, this should help gold.
  • Keep in mind that gold is a relatively small market and subject to manipulation.
  • Gold is being aggressively sold as of this writing. Take a look at the charts of gold ETF (GLD), silver ETF (SLV) and gold miner ETF (GDX).
  • Central banks do not want gold prices to rise.
  • In the medium term, the addition of Salesforce.com (CRM), Amgen (AMGN) and Honeywell (HON) to Dow Jones may also help the index move higher.

FDA Chief Apologizes

On Monday we shared with you that we could not find any reliable data supporting the 35% number thrown around liberally by the FDA chief regarding the coronavirus convalescent plasma.  The momo crowd did not care and bought stocks aggressively on the news.

The big news is that the FDA chief has now apologized for overstating that 35% more patients would service with coronavirus plasma treatment.

Of note for investors is that the momo crowd bought stocks on the announcement but has not sold on FDA chief’s apology.

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