* See UPDATE below...
I've been writing about the COVID-19 pandemic and its effects on world markets for much of the year. My post of April 27 outlined information on the origins of the virus (what little was known at that time) and its spread from China to the rest of the world. It highlighted China's gross lack of transparency toward world leaders and their scientists, destruction of world economies, wilful negligence, and world-wide destruction of human life caused by the virus.
I asked which foreign investors were willing to buy into China's Shanghai Index (SSEC) to further prop up the CCP regime, bearing in mind that China did nothing to assist foreign leaders in their mad dash to find any information about the virus and how to mitigate its effects and contain the spread.
The US began its mandatory lock-down of its states in March. Unemployment skyrocketed...but has been declining steadily, to date, to a level just below the worst numbers posted during the 2008/09 financial crisis.
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| US Unemployment Rate |
Judging from the (essentially) steady buying, to date, that began in China's Shanghai Index (SSEC) in February, it appears that many investors did put their money to work in China...regardless of China's culpability in this matter.
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| SSEC Monthly |
Conversely, investors began buying the S&P 500 Index (SPX) in April, following the panic sell-off that began in February.
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| SPX Monthly |
Both the SSEC and the SPX are at levels just below their respective near-term major resistance levels (3400 for the SSEC and 3500 for the SPX). The US Presidential election is fast-approaching (November 3).
It looks as though investors have hedged their bets by buying into both markets. It seems that some are betting that former Vice-President Joe Biden would win the presidency (a win for China and the SSEC, due to his pro-China stance), while others are betting that President Trump would win a second term (a win for the United States and the SPX, due to his tougher stance on China).
Keep an eye on the SPX:VIX ratio. Following a bullish moving average Golden Cross formation near the end of September, price is caught in between the 50 and 200 MAs, but has been rising the past several days.
Should we see the RSI rise and hold above 50, and the MACD and PMO indicators reform bullish crossovers, we should see this ratio recapture the 150 level.
Under such a scenario, look for the SPX to retest its recent all-time high of 3588.12 and, possibly, move higher...marking a second-term win for President Trump, in my opinion.
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| SPX:VIX Ratio Daily |
So, to quote President Trump, "We'll see what happens!"
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| US 2020 Q3 GDP (unprecedented) |
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| US 2020 Q3 GDP PRICE INDEX (the highest reached since Oct. 2008) |
