CNBC/Bob Pisani
Traders are confused by the stimulus back-and-forth and have their doubts about the market gains

Some are calling it “a la carte stimulus,” with aid for airlines in Column A, PPP aid in Column B.

Whatever it is, hopes for stimulus — preelection, postelection, comprehensive package, stand-alone deal, whatever and whenever — is supporting breakouts in cyclicals like industrials, materials, consumer discretionary and banks.

Many big names like Caterpillar, Eaton and FedEx have broken to new highs. Materials stocks like Martin Marietta, Vulcan Materials and Nucor are up 10% in the last week. Even bank stocks like US Bancorp are breaking out to multimonth highs.

For some, the cyclical rally is getting way too stretched.

“The action over the last couple weeks is baking a lot of positive news into the market,” said Jack Miller, head of trading at Baird.

Alec Young, chief investment officer at Tactical Alpha, agrees. “We are quietly getting overbought. The market is looking a little tired, the size of the rallies is getting smaller, with little waves of selling,” he said. “It’s true cyclicals are rallying, but they have not shown any ability to do longer-term rallies.”

“I don’t think this market is very compelling, and I am pulling back and waiting to see what happens,” he added.

Others also have doubts about this rally. They note that volume on up days has been notably light while on down days it’s notably heavier. This implies there’s not much buyer conviction, that much of the rally is simply sellers holding onto stocks unless prices rise.

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Marketwatch/Shawn Langlois
Stocks are going to ‘crack pretty hard,’ and here’s what one billionaire says investors should do to prepare

‘Within 18 months, it’s going to crack pretty hard. I think that you want to be avoiding it for the time being. When the next big meltdown happens, I think the U.S. is going to be the worst performing market, actually, and that’ll have a lot to do with the dollar weakening.’

That’s DoubleLine Capital billionaire Jeffrey Gundlach, who has been hailed as “The Bond King,” sharing his bearish thoughts on the stock market in a recent Real Vision interview.

“I actually think owning 25% gold isn’t crazy right now. Nor do I think owning 25% cash is crazy,” he said, noting that the two risk-averse positions make up half of the “permanent portfolio” concept, alongside 25% in stocks and 25% in bonds.

“That’s a good investment right now,” Gundlach said. “I think we have such a potential tail risk of outcomes, such a dispersed potential outcomes, that you really need to have this barbelled asset allocation concept.”

He went on to paint a bleak picture for the economy, even as many Wall Street pros call for a V-shaped recovery in the U.S. “I don’t think people fully understand how many business closures there’s going to be in the next few months,” he said, adding that he’s shocked at how many empty storefronts are popping up. “There’s going to be a lot more of that. I think it’s going to really accelerate. I think there’s going to be real problems in the wintertime here.”

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Bloomberg/Ruth Carson
Goldman Says Short Dollar as Odds Firm for Biden Win, Vaccine

The dollar may tumble to its lows of 2018 on the rising likelihood of Joe Biden winning the U.S. election and progress on a coronavirus vaccine, according to Goldman Sachs Group Inc.

“The risks are skewed toward dollar weakness, and we see relatively low odds of the most dollar-positive outcome — a win by Mr. Trump combined with a meaningful vaccine delay,” strategists including Zach Pandl wrote in a note Friday. “A ‘blue wave’ U.S. election and favorable news on the vaccine timeline could return the trade-weighted dollar and DXY index to their 2018 lows.”

The ICE U.S. Dollar Index has fallen over 3% so far this year to just over the 93 level as investors reacted to unprecedented pandemic-related monetary stimulus from the Federal Reserve and rock-bottom interest rates. The gauge traded below 89 in 2018, a level which would imply a further slide of more than 4%.

Goldman joins the likes of UBS Asset Management and Invesco Ltd. in predicting a weaker dollar as Biden extends his lead over President Donald Trump with less than three weeks to election day. It recommends investors short the dollar against a volatility-weighted basket consisting of the Mexican peso, South African rand and Indian rupee.

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Kitco/David Lin
Making the case for $3,000 gold: the power of scarcity

Despite the gold price hitting all-time highs this year, growth for both the bullion and the gold mining sector is just getting started, with gold expected to expand to the $3,000 an ounce range, said Jeff Pontius, CEO of Corvus Gold.

“I think we’ve got a fundamental market that’s got a lot of legs left in it. I think we’ll easily see gold move into the $3,000 an ounce range, and particularly with Corvus, we’re still being valued down here in the low $1,500,

$1,400 number,” Pontius told Kitco News. “Gold resources are going to be more scarce. It’s going to be harder to produce the current profile that we have now overall in the gold industry.”

Macroeconomic forces that have been bullish have not changed, Pontius noted.

“We’re in this part of the cycle that has some fundamental tailwinds with it. During the financial crisis, we put about $1.5 trillion in the money supply. Now, we’re exceeding on a global basis, getting close to $20 trillion.”

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