Market Condition:
Market is in a confirmed uptrend, the indexes continue to trend along their 10-20 day lines. There is only one distribution day (day of heavy institutional selling) on the Nasdaq and S&P 500, a rare event. Leading groups consist of software, internet, semiconductors, mining biotech and medical products. Widely held stocks continue to show a favorable reaction to earnings. Last week I was a bit cautious, due to some dubious earnings reactions, that has quickly changed. For now just put that idea in your back pocket. All across the board it has been an earnings reaction bonanza, multiple gap- ups being held up on large volume with follow-through on subsequent days. A solid institutional footprint. You have to change your opinion, based on the evidence in front of you. Right now the market is showing a clear imbalance of demand for shares.
-Widely held and popular growth stocks had extremely favorable reactions to earnings, if not immediately the day or two after recoveries were seen across these names include Facebook (FB), Alphabet (GOOGL), Amazon (AMZN), Tesla (TSLA), Shopify (SHOP), Paypal (PYPL), Square (SQ), Fastly (FSLY), Beyond Meat (BYND), Chegg (CHGG), Twilio (TWLO), Alteryx (AYX) and many many more.
-Despite the run in the market there is no euphoria with the American Association of Individual investors (AAII) showed one of the highest bearish sentiments coming in at 52% bears, the highest reading since April of 2013.
The total net assets invested in U.S. money market funds reached a record $4.768 trillion on 5/6/20 (data released weekly), according to the Investment Company Institute (ICI). That is well above the $3.923trillion peak (1/14/09) reached during the 2008-2009 financial crisis. ICI data indicates that total net assets have increased $1.921 trillion since the end of 2017, -money is not rushing into the stock market.
-The April Jobs report was the worst in American history, non-farm payrolls plunged by 20.5 million, basically one month wiped out the prior decades gains.
-6 states are reopening, 25 states are partially re-opening, and 20 states are still shut down.
-High frequency data shows improvements, in Box Office receipts, rail car traffic, hotel occupancy, increase in hotel daily rates, and people passing through TSA checkpoints.
-Speculators are still betting against this rally, they are holding more than $40 billion of equity index futures net short. They tried this in early 2019 as well.
Summary:
The Uptrend continues.
Pet peeve: Being asked (often by media) whether we’re telling investors to “get in or get out”…that’s gambling on a moment in time; when investing should ALWAYS be a process over time.