Pro Perspectives 4/30/20

April 30, 2020

Stocks end the month lower today, after a 36% bounce from the March 23rd lows.

Let's take a look at the chart we've been watching, which presents some key technical resistance up here …

So, we have this big technical level around here at 2,930 which represents the 61.8% retracement of the full decline in stocks.  And just above here, we have the 200 day moving average, which comes in at 3,004.

As we've discussed, this looks like a sensible area to mark the top of a range for a while.  And I suspect we may see stocks trade back and forth in a range until there's some visibility into how the world looks with economies reopening. 

What has yet to show any signs of life in a world where governments are doing cash handouts and much more?  Commodities.

We have this chart of broad commodities …

This chart looks like a deflationary vortex, not a world where governments are handing out cash.    

I suspect this chart of commodities will change/will be the next spot to watch. 

As we've discussed, the government and central bank response is designed to inflate the value of the economy, and deflate the value of debt. That's a recipe for a global reset of prices (and a recipe for a reset of wages), and commodity prices should soar.