Into The Valley We Go

Before the Covid-19 hit, I had fair value for the SPX at 2800 (16.5 x $170. SPX earning power).
I was a conservative fuddy-dud as the market traded above that level for much of last year, and it
surged early this year, topping out at a whopping overvalued level near 3400. We all know what
happened next. Now, economic downturn be damned, we have the SPX trading again above 2800!

The global economy has entered a deep downturn and unlike previous such instances there now is
heavy monetary and fiscal support in place to cushion the fall. Here in the US, the powerful rally
off the March low of 2200 reflects investor confidence that the economy will soon begin to
recover, especially since most states have begun processes to re-open local economies after weeks
of stay-at-home /social distancing requirements.

The re-opening processes do not comply with the guidance offered by the medical experts, and
with the virus case count still rising, the chance that the virus will infect perhaps many more
people here makes these ventures highly risky. Not only could virus case surges crash local health
systems, they could alarm enough people to force states to reconsider their choices and take
restrictive actions which could abort nascent local recoveries and create a national political crisis.
At the least, the SPX ought to pause here just to gauge whether this new nightmare could eventuate.

Polls show most people want to see the national economy re-open but also show substantial
apprehension about going out into it and risking their health and lives. Well, if there was ever a
time for Lady Luck to smile down on us, this is it.

The chart link below shows the SPX has reached a critical pass or fail spot (RSI %). The medium
term MACD is improving but still remains negative, and the longer run MACD continues
deeply negative, suggesting that the market's true longer view direction is, if not negative
yet to be decided in the weeks or months ahead. Finally, the SPX is approaching an important
test of its 40 wk. m/a.  SPX Weekly