I think the narrative on the rise of the COVID-19 began to shift yesterday; it went from a second wave that could result in a second lockdown, to the first wave with better testing rates and revealing a lot more younger adults are positive. The number of people that have recovered is approaching one million, and the death rate is plunging. Not only can we live with a situation where younger folks with very low mortality rates contract the virus, but we have to live with it.

The Message of the Market

Yesterday, market breadth reflected the ‘tug-of-war’ session that saw major indices eke out fractional gains. But the 150 new highs on the NASDAQ also reflected a widening of momentum names coveted by short-term traders and long-term investors.

Sector Watch

Now that ‘phase two’ openings have begun in earnest around the country, Consumer Discretionary (XLY) names look poised to rally even more. For all the hype that Internet shopping receives, there are still a lot of folks like me that like to touch and feel the stuff I’m buying (sadly, only a few stores carry my size, so the tailor comes to the house. However, I still like to shop for ties, socks, and shoes at brick-and-mortar stores). 

The names that are going to lead the XLY through a key resistance (double top that triggered selling earlier in the month) will also be breadwinner names like Chipotle Mexican Grill (CMG) and Nike (NKE), but there will be a ton of speculation among those retail names hanging by a thread (no pun intended).

Portfolio Approach

Yesterday, we took profits on two positions and raised Cash to 10%.  This morning we are taking profits on a Consumer Discretionary and adding a new position in Consumer Discretionary in our Hotline Model Portfolio. If you are not a current subscriber to the Hotline, contact your account representative or email Research@wstreet.com.

Today’s Session

Last night, my friend Peter Navarro misspoke on Fox News while discussing the US – China trade deal, sending equity futures reeling.  Peter has been a China bear for decades, and he accurately called all the issues that have evolved in recent years, but he is not part of the negotiating team. 

President Trump leaped in quickly with a tweet to correct the record.

The episode underscores the fragility of the rebound, but it also shows an eagerness to buy this market on dips, even when it’s in afterhours trading.

S&P 500

Dow Jones Industrial Average