The Fed changed the rules again, saving $40 billion on Wall Street! Will U.S. stocks escape the "dual century top"?
After the outbreak of the epidemic, US stocks experienced a "melting + waterfall" plunge process. However, the Fed's "zero interest rate + unlimited QE" effectively eased market panic, and the stock market rebounded sharply.
However, we can see that in addition to the Nasdaq, the other two representative indexes-the Dow Jones 30 industrial stock index and the S&P 500 index have failed to reach new highs, and the Dow Jones rebound high point is locked at this round. 27572 points, well below the historical high of 29568 points.
At the same time, under the combined effect of the civil strife and the second outbreak of the epidemic, on June 11th, the US stock market reproduced the "decapitation" trend, and then failed to cover the gap gap left on June 11th after 11 trading days. And on June 26, the shading of the bald head and bare foot was received, a decrease of 2.84%.
From the overall technical form, this will be a historic moment. If the Dow Jones Index continues to break below the 24843 key point in the next few days, then the US stock market is bound to build a "century double top", and the closing point on June 26 is 25015 points.
Will the Fed tolerate such a situation? In fact, it has been spared no effort. For example, on June 25 local time, news came out that the Fed passed the "Volk Law Amendment" with a 4:1 vote and stated that the Volcker Law has been revised and will take effect on October 1. .
The "Walker Rule" is named after the former Fed Chairman Paul Volcker and is also an important part of the "Dodd-Frank Financial Regulation Act" promulgated by the Obama administration in January 2010. Paul Volcker, the chairman of the Obama Administration’s Economic Recovery Advisory Committee during the crisis, proposed that “banks should not be allowed to use deposits from federal deposit insurance—customer deposits for proprietary trading, investment in hedge funds, or private equity funds.” But now it is amended, the bill will allow banks to increase their investment in venture capital funds, etc. At the same time, the US regulatory authority has also removed the requirement that banks must hold margin when trading derivatives such as swaps with their affiliates. According to Bloomberg News, the margin waiver may release 40 billion US dollars of funds for Wall Street.
It is this modification of the law that stimulated the stock prices of Bank of America stocks to rise sharply. On June 25, the stock prices of JPMorgan Chase, Bank of America, Goldman Sachs, and Morgan Stanley rose by 3.49%, 3.82%, 4.59%, and 3.92%, respectively. As a result, the overall US stock market rose by more than 2%. But unfortunately, such market conditions have only lasted for one day. The decline in US stocks on June 26 not only engulfed the previous day's gains, but also the heavy volume.
"Double-headed" is often a sign of the stock market entering a technical bear market. Will the current trend of the US stock market technically become "century double-headed"? The probability is extremely high.
First, the data has shown that there is indeed a second outbreak in the US epidemic. Statistics from the US Centers for Disease Control and Prevention on June 27 show that over the past 24 hours, more than 44,000 new cases have been diagnosed in the United States, and the number of new cases in a single day has been refreshed again. In fact, the number of people diagnosed with new coronary pneumonia in the United States has exceeded 40,000 for several consecutive days, which is the highest number of people diagnosed in a single day since the outbreak.
Second, in view of the continued surge in new cases, there are currently 12 states in the United States that have announced the cancellation of economic restart plans or suspended ongoing phased restarts. US disease control experts generally believe that the vast majority of U.S. states simply do not meet the conditions for resumption of work, coupled with the escalation of civil unrest in the United States and the disorderly contact of personnel, which has caused 31 states to announce the rebound of the epidemic, which is bound to affect the wider scope US economic restart plan.
Thirdly, after the outbreak, the health of the US economy is much lower than before the outbreak. If it is said that there is already a “bubble suspicion” at 29568 points, then compared with the current or future US economic fundamentals, the current 27000 points must already exist More serious bubbles.
Fourth, the stock price propped up by the huge scale of liquidity must be a tower on the sand. Once liquidity problems occur, how should the US stock market go? Of course, the Fed will not immediately withdraw liquidity supply, but the rise of the stock market after all requires the market's "good expectations" for the future economy, and whether the United States can bring such expectations to investors? In fact, there have been reports that some large investment institutions are withdrawing from the US stock market, including Warren Buffett.
Nonetheless, the above problems have brought huge "uncertainty" risks to the US economy, and are not conducive to the further rise of the US stock market, and even provide the necessary conditions for building a "century double top". But the United States is the United States after all, and its financial conglomerate has no one in the world to protect the stock market. So, even if a "double-century century" is formed, how much can the decline be? Perhaps it may not be a mile.
Unlike the Dow and S&P, the Nasdaq may look different in the future. The reason is that the future world is extremely certain to move towards a new economy. As the gathering place of the world's top technology companies, the Nasdaq's trend may be another matter, which is probably the key to its unique and frequent high in the US stock market trend.
Niu Wenxin, chief commentator of China Economic Weekly