Bills pending in Congress would provide free rent and mortgage payments during the coronavirus emergency, and a monthly check of $2,000 for those over age 16 and $5,500 for a family with three children.

My heart goes out to those who have been adversely affected by the coronavirus. This is, for some, a devastating time.

It could be that the subsidies from the government may ward off economic destruction.

And for stock market investors, the key question is: “How will all of the existing and potential new government largesse affect the stock market?”

Let’s explore with the help of two charts.


Please click here for an annotated chart of the SPDR Dow Jones Industrial Average ETF DIA, which tracks the Dow Jones Industrial Average DJIA.

Please click here for an annotated chart of the Federal Reserve’s assets.

Note the following:

• The first chart, which is monthly, gives a long-term perspective. It should be the starting point of all analysis.

• The first chart shows that on Jan. 22, The Arora Report called the potential stock market drop ahead due to coronavirus.

• The first chart shows that the stock market has touched the low band of the resistance zone.

• Investors have been writing, saying they are struck by the simple fact that the stock market touched the top band of the “mother of support zones” shown on the first chart and reversed to the upside. The mother of support zones was given in advance before the stock market drop.

• The second chart shows the massive rise in the Federal Reserve’s assets.

• Both charts together show that when the Federal Reserve started adding more liquidity for repos (repurchase agreements), the stock market took off in October 2019 for a straight-up run to Feb. 19, 2020.

• The second chart shows the massive rise in Federal Reserve assets due to money printing to finance government largesse to cope with coronavirus. The first chart shows the stock market rally….Read more at MarketWatch.

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