I bet by the time the closing bell rang yesterday, everyone’s inner Napoleon Dynamite came out asking about some of the incredulous stuff happening in the market right now.

Sure, bears are just upset and whining about everything from the Fed to the household survey in the May jobs report. But we are used to them at this point. In fact, each morning when they are paraded on financial television, I feel great. The more they bitterly complain, the higher the market goes.

The thing is the rally is largely orderly, although buying is now triggering buying, like the program that sent major indices spurting into the close.

And now, the S&P 500 is up for the year; an almost unthinkable occurrence three months ago. Folks that wanted a piece of the action, albeit with some caution, crowded into Utilities. All sectors, save for Material, enjoyed the solid session.

S&P 500 Index	+1.20%
Communication Services XLC	+1.87%
Consumer Discretionary XLY	+1.52%
Consumer Staples XLP	+1.08%
Energy XLE	+4.50%
Financials XLF	+1.91%
Health Care XLV	+0.69%
Industrials XLI	+2.01%
Materials XLB	+0.13%
Real Estate XLRE	+2.19%
Technology XLK	+0.50%
Utilities XLU	+2.68%

Jump in the Water’s Fine

The ‘advancers to decliners’ have been on a monumental run of 2:1 or better for nearly two weeks, and the underlying volumes speak to enormous conviction.

On the NYSE, the up volume was 8 billion versus only 604 million on the downside. Wow!

Breadth	NYSE	NASDAQ
Advancing	2,440	2,519
Declining	545	824
52 Week High	57	128
52 Week Low	4	4
Up Volume	7.98B	4.48B
Down Volume	604.19M	1.75B

Earnings Season Wraps Up

Remember back on the eve of earnings season when all the experts said the numbers would sink the market?  I remember it was the prime reason none of them believed a string of positive sessions were nothing more than a bear market bounce.

Financial Releases 494 S&P 500 Cos.	Earnings	Revenues
Beat Consensus	65.4%	59.3%
Missed Consensus	29.8%	40.7%
Blended Results	-12.6%	-1.4%

Future Financial Release Consensus Change	Earnings	Revenues
2Q2020	-43.0%	-12.2%
3Q2020	-25.2%	-6.5%
4Q2020	-13.4%	-2.5%
1Q2021	+11.4%	+5.3%

Dawn of the Dead

There was a pocket of action that is as mysterious as grandma doing her thing at the dunes: why are bankrupt stocks exploding higher? Bankruptcies in 2020 were on the rise when the coronavirus (COVID-19) slammed the world, and shutdowns took down names already precariously on the edge.

However, a crazy thing has happened over the last couple of weeks. Companies in or near bankruptcy caught a few bids and have made monster rallies that are hard to understand. I have seen this kind of stuff before, and it’s a sign folks are gambling on not being the last sucker.

I have not read all the filings, and maybe common stock shareholders will retain the same ownership position, but that is usually not the case. I simply think it is that cray-cray money itching for action in the hottest game in town.

Bankruptcy Names	June 8th	2020 Intraday low
Hertz (HTZ)	+115%	+1,283%
Chesapeake (CHK)	+182%	+800%
Pier One (PIRRQ)	+79%	+548%
JC Penny (JCPNQ)	+96%	+473%
Whiting Petroleum (WLL)	+152%	+404%
Prairie Provident (PRPRF)	+131%	+443%

Note: I do not play this game. I would just like to warn folks that you better be nimble because this is like a game of musical chairs – and at some point, the music stops.

Portfolio Approach

We took monster gains on two ideas in the model portfolio yesterday, and we keep putting cash to work.

Today’s Session

The Small Business Optimism Index rose 3.5% in May to 94.4, up solidly from 90.9 in April according to the NFIB. 

Only 2 of the 10 components declined.

• Uncertainty Index +7% points to 82.
• Expected business conditions in the next six months +5 points to a net 34%, after a 24-point rise in April.

Business owners are optimistic about the future and anticipated a short-lived recession.

NFIB’s Chief Economist Bill Dunkelberg stated, “As states begin to reopen, small business continue to navigate the economic landscape rocked by COVID-19 and new government policies.  He added, “It’s still uncertain when consumer will feel comfortable returning to small businesses and begin spending again, but owners are taking the necessary precautions to reopen safely.

The market has been consolidating and a pullback is overdue.  The major indices are down this am.

Comments

Are we going to see the Payne affect today and rally to a positive close? I'm optpmistic christopher voccola on 6/9/2020 1:10:33 PM

Tweet

 

Home | Products & Services | Education | In The Media | Help | About Us | Disclaimer | Privacy Policy | Terms of Use | All Rights Reserved.