Finally Friday!

Hey everyone and TGIF!, Another week is in the books...and what a week it was! If you missed the ground-breaking webinar hosted by Markay Latimer and Rob Booker yesterday, you could still [catch it here](. And if you did attend, you’re probably trading Markay’s top-secret ticker symbol right now! Good for you! Stimulus Talks & Government Debt New stimulus talks continue, but whether we'll see relief soon still remains to be determined. The CARES Act, which provided federal unemployment assistance and direct payments to the majority of Americans, has long expired, but the effects on the government debt might be around for quite some time. [Check out our article]( how the pandemic and consequential stimulus plans are affecting governments around the world. 2020 IPOs: Where Are They Now? There have been many IPOs this year, some have been mediocre, but some, like Snowflake ([SNOW]( have exceeded expectations.  Snowflake went public mid-September and has now nearly tripled its initial share price, starting at $120 and peaking at $342. What will be the next breakout IPO? There are a few that are certainly worth watching. [Check out this article]( on a few the DPP team is keeping an eye on. Dear Reader, After my last report, you're probably asking yourselves what could put the stock markets under pressure. I've been thinking about this, and I'd like to share my thoughts with you. I'd also like to draw your attention to an interesting market situation regarding gold. Gold price at an important support point Let's begin with the gold price per troy ounce in USD. I've added the 200-day moving average to the following chart. As you probably know, this represents the average closing price for the last 200 trading days. If we assume 5 trading days per week, the 200-day moving average covers a period of about 40 weeks, or 10 months. This means it shows long-term trends for the particular market, and since this average is based on prices from the exchange, the trends are objective. Gold price in USD per troy ounce has landed on the 200-day moving average I chose an extra-long time period so that you can see the relevance of the 200-day moving average for the gold price (and of course, every other market). The yellow oval shows where the gold price touched down right on the 200-day average yesterday. In upward trends, the average usually functions as a support level. In downward trends, it tends to function as a resistance level. Of course, there's still theoretically room for the price to fall—potentially within the trend channel that's been building since August 2020 (which I've drawn in red), but also potentially within the long-term trend channel that's been building since the end of 2018 (which I've drawn in green). If you think it's possible that the price could fall to one of these depths, you might want to think about a staggered entry. News items cause prices to fall In the past, external events and news were often the cause of the market being under pressure. We can recall to mind Long-Term Capital Management (LTCM) and Lehman Brothers (LB): During Russia's debt crisis in 1998, the hedge fund LTCM suffered extreme losses in its financial dealings—around 1.25 billion USD—and this threatened the entire global financial system. Only by a bailout could at financial crisis be avoided. The investment services company Lehman Brothers—unlike many similar institutions—was NOT saved from insolvency in a surprise move in September 2008. There's also the possibility that someone could uncover a huge case of fraud—like Wirecard, but bigger. A (long) list of potential bad news items What could put Wall Street—and thereby all other exchanges—under pressure? Here are some ideas. For one thing, the hype around the Coronavirus vaccine could shrink or vanish for one of these reasons: - The Coronavirus vaccine candidates do not get "emergency approval" from health oversight agencies, significantly delaying when the vaccine becomes available.  This is not an entirely unlikely scenario, especially because this is a new type of vaccine that uses RNA templates to help the body create the desired immune response. No vaccine of this type has yet been approved. Also, the research and development of this vaccine has been very fast (and, in my opinion, careless). Development of a vaccine usually takes between 9 and 16 years. The record is about 5. This means the potential side effects may not have been thoroughly examined, especially not long-term ones. Let's remember that one of the swine flu vaccines was linked to an increase in narcolepsy. "Some of the side effects of the vaccine were diagnosed as narcolepsy. As of early 2011, 161 cases of narcolepsy had been identified out of 31 million doses of the Pandemrix vaccine, 70% of which were in Sweden and Finnland. Germany also had 7 cases, mostly in children between 4 and 19" (source: Wikipedia). - The Coronavirus could mutate, as flu viruses do from time to time. Then the vaccine would suddenly be less effective than promised. - Difficulties in production, logistics, or distribution could delay the time when the vaccine becomes widely available. - There will not immediately be enough vaccines for everyone, or not enough people could request the vaccine. Of course, there are other things that could give the markets a bit of indigestion. - Everyone knows that Donald Trump has been opening court cases complaining of election fraud in several US states. It could take longer than we think to finally settle everything. - For the last 4–6 weeks, we in Europe have been in various states of lockdown. In many countries, we are looking at an extension rather than an easing of these measures. In the US, more and more areas are entering local lockdowns. - On the other hand, court decisions regarding the PCR test could call quarantine measures into question. In Portugal, as I already mentioned in a previous report, previously-required quarantine measures have been lifted because the court does not believe the PCR test is a reliable indication of illness and/or infectiousness. - For most Americans who have been unemployed since March of this year, the benefits they receive from the CARES act will expire at the end of 2020. This will make their financial situations even more dire and affect their consumption levels as well as financing from banks. The agreement from several months ago to defer loan repayments will also expire in the coming weeks. - Financial assistance in the form of a stimulus package (helicopter money for the unemployed) may take longer than expected. - The central banks could notice that digitally printing money is not having the economic effect they've hoped for. - It's becoming clearer and clearer that the economy will not recover in the way investors are hoping. The v-shaped recovery that investors thought likely 6 months ago has already disintegrated. This may also happen to the w-shaped recovery. Summary Stock markets are always especially vulnerable to "bad news" when investors have positioned themselves very optimistically. The inverse is also true. I have noted more than once in the past weeks that investors are behaving euphorically. Here's an update: The put/call ratio for US stocks fell to 0.38 yesterday. That is the 2nd-lowest value since mid-June. The ratio was 0.38 on July 15th and August this year, and 0.37 on November 9th. A put/call ratio of 0.50 means twice as many calls (bets on rising prices) have been opened as puts. In this report today, I've listed numerous possible bad news items that could affect the stock markets, and this is not a complete list. In my more than 40 years of trading experience, I have learned this much: The longer it takes for the stock market to experience a correction, the stronger this correction will be when it happens. In these cases, investors are wont to flee to "safe harbors." Gold has often been a very attractive harbor. Stay positive! Regards, Dr. Gregor Bauer Leveraged trading in foreign currency or off-exchange products on margin carries significant risk and may not be suitable for all investors. 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