Upon meeting Harriett Beecher Stowe, the abolitionist and author of “Uncle Tom’s Cabin” in 1862, President Lincoln is said to have remarked: “So you are the little woman, who wrote the book that made this great war”. Our country has been involved in wars literally from our founding as a republic born of a revolution against King George III. However, none have extracted a cost in terms of casualties as the American Civil War in absolute numbers of dead, or as a percentage of the population of the time. Fort Sumpter, guarding Charleston Harbor, was attacked on April 12, 1861 to set in motion the first mechanized war in history between the industrialized North, and the slavery driven agriculture economy of the great Southland.
Early on the South under the superb leadership of General Robert E. Lee won victory after victory while Lincoln seethed at the plodding pace of General George McClellan and the Army of the Potomac. In contrast to the tepid McClellan, Lincoln admired the swift actions of Ulysses S. Grant, who took responsibility for his decisions, and treated both officers and enlisted men under his command with respect. However, Grant was surprised at Shiloh and was severely criticized, but Lincoln stood by his fellow Midwesterner. When Grant was accused of being a drunk, Lincoln is reported to have responded by saying: “Send a barrel of that whiskey Grant is drinking to all my generals.”
From July 1 to July 3, 1863 following a Union defeat at Chancellorsville, General Lee attacked Union forces under the command of General George G. Meade at Gettysburg Pennsylvania. Lee ordered an attack by 15,000 troops at Cemetery Ridge. The meadow appeared open for Pickett’s charge, but intelligence had failed to note that the area tended to be boggy, nor had the Union’s movement of artillery to higher ground the night before been detected. Pickett’s charge was slowed by the soft ground, and came under heavy attack by Union cannon. Pickett’s charge did manage to pierce the Union line, but eventually failed at the cost of heavy casualties. The battle of Gettysburg is viewed as where the epic struggle between North and South turned in favor of the industrialized North.
In an age where oratory by politicians was admired for its length, President Lincoln wrote his brief 272 word Gettysburg address reportedly on the back of an envelope on the train to the battlefield. On November 19, 1863 President Lincoln delivered his famous address.
“ Fourscore and seven years ago our fathers brought forth on this continent a new nation, conceived in liberty and dedicated to the proposition that all men are created equal. Now we are engaged in a great civil war, testing whether that nation, or any nation, can long endure. We are met on a great battlefield of that war. We have come to dedicate a portion of that field as a final resting-place for those who gave their lives that that nation might live. It is altogether fitting and proper that we should do this. But, in a larger sense we cannot dedicate – we cannot hallow — we cannot consecrate – this ground. The brave men, living and dead, who struggled here have consecrated it, far above our poor power to add or detract. The world will little note, nor long remember what we say here, but it can never forget what they did here. It is for us the living, rather, to be dedicated here to the unfinished work which they who fought here have thus far so nobly advanced. It is rather for us to be here dedicated to the great task remaining before us – that from these honored dead we take increased devotion to that cause for which they gave their last full measure of devotion – that we here highly resolve that these dead shall not have died in vail – that this nation shall have a new birth of freedom and that government of the people, by the people, for the people, shall not perish from the earth.”
With grateful appreciation to all which have served, and especially for those which “gave their last full measure of devotion”.
TATY — A REPRESENTATIVE OF A STRATEGIC FAMILY OF SUPPLY AND DEMAND INDICATORS
TATY is shown above in yellow with the S&P-500 overlaid in red and blue candle chart format.
TATY finished the week at 122, which is a deeply oversold level. I reviewed a number of indicators in this family, and all are telling the same story, an inability to rally back into their more normal zones of operation. This continues to suggest that large players remain suspicious of the rally off the March 23 low. That rally was record setting, just as the decline setting it up was record setting. This suggests that something on a very large scale, or degree, is likely at work. And, if that is the case, then what has happened since the all-time high in February may just be a piece of something much larger, which is yet to unfold.
Screenshot 122 shows the S&P-500 cash index with a Fibonacci projection overlaid. In a financial sense there is a “Gettysburg” like struggle going on between the forces of the bulls, which apparently are convinced that unlimited trillions of stimulus in the form of massive debt being laid on our nation’s balance sheet will levitate the stock market back to all-time highs. And, of course, keep it there at least until after the election is over.
Then there are the forces of the bears, which apparently believe that markets do indeed discount the future, and often look past the valley to the return of better times, but have come to believe that this valley may be the deepest and widest on record, and that a return to “normal” may lie years, as opposed to weeks down the road. Oh, and by the way all those trillions of debt already on the balance sheet, exacerbated by the likely trillions yet to come, represent an existential hazard to the financial system, even if nominal interest rates rise only marginally. Or, if as most medical scientists believe, unforeseen challenges and disappointing failures will appears on the road to a safe and effective vaccine, or efficacious therapy, which a substantial body of medical history suggests will turn out to be the case. In our instant gratification society these historic viral realities represent very inconvenient truths for the bulls.
For a while this past week it appeared that like Pickett’s charge, either the bulls or the bears would get the upper hand in the struggle at the Fibonacci 62% retracement level (See Screenshot above). However, the stock market turned languid and listless on low pre-holiday volume. So the stock market continued its master of disguise role, but did leave a few clues that resolution may not lie many more days in the future. Investors will notice that the record setting blast off higher from the March 23 low has now resolved into a decelerating sideways movement struggling approximately at the Fibonacci 62% retracement level. Inside the struggle of the past week there were a few hints that the see-saw consolidation of the last several hours may be resolved by a brief, but fleeting move to new recovery rally highs, followed by evidence of exhaustion, and/or the expiration of the recovery rally. A gap in the daily S&P-500 chart marginally above surrounding the 3000 level would likely serve as a reasonable target for any further rally.
THE BOTTOM LINE
The stock market has managed to disguise its intentions for another week. However, the clues continue to accumulate that there will likely be resolution of the struggle between the bulls and the bears sooner rather than later in the days just ahead. The weight of the evidence continues to favor preservation of capital over a return to normalcy, and new all-time highs. New all-time highs remain a possibility, but a lower probability. We believe there is a one in four, or possibly a one in three chance, that a new leg down in a continuing bear market could begin with a gap down followed by a brisk acceleration lower. These are substantial enough odds to make us especially risk adverse at this critical level where a kind of financial Gettysburg struggle, and potential turning point, is likely being played out. If evidence to the contrary arrives, then we will adjust our strategies and tactics to account for that new reality.
Please stay safe!
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