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Morning Commentary

FORGING AHEAD ON EVOLVING NARRATIVES 

By Charles Payne, CEO & Principal Analyst
7/7/2020 9:38 AM

Monday was an impressive session that had enough lulls to allow folks spying the exits to bolt without making a lot of noise. Instead, buyers continued to emerge throughout. 

Market Breadth was impressive as well, especially volume comparisons, which approached a 4:1 ratio on the New York Stock Exchange (NYSE), and new highs versus new lows.

The backward time machine continues to march back to the good old days before the coronavirus (COVID-19) crisis. New highs on the NASDAQ cleared 200, edging closer to the February 19th high of 279.  There were only three names on the NYSE closing at new 52-week lows.

Market Breadth

NYSE

NASDAQ

Advancing

2,084

2,180

Declining

916

1,164

52 Week High

96

220

52 Week Low

3

19

Up Volume

3.76B

3.13B

Down Volume

1.05B

1.42B

 

Spreading the Wealth

More names joined the winners club in the S&P 500, although still below the 191 winners when the index peaked on June 8th.  Winners are now averaging a 17.31% gain, and the top twenty nearing 55%.

Winners

 Losers

Moving into the Green

As the NASDAQ forged ahead to another record high, the S&P 500 edged ever so close to turning positive on the year. The Dow has a long way to go but could play ‘catch up’ quickly if Boeing (BA) breaks above $200.00, which could happen as the Federal Aviation Administration (FAA) continues to process the certification of new 737 Max plans.

Perhaps, it is a case of the Fear of Missing Out (FOMO) or Oh, No (OHNO), I have not made any money, and I get paid a king’s ransom to manage money.

I will say, however, Financials continue to be the wildcard. They put in a solid session, leading all other sectors, save for Consumer Discretionary on the day. Goldman Sachs (GS) was the big winner in the sector, followed by a parade of insurance names, of which many are beaten down this year.

The leading names in Consumer Discretionary were Amazon (AMZN) and Chipotle (CMG), and a few home builders and other housing-related names filled the top ten movers.  

Value investors should continue to focus on Industrial names, which should be a winner no matter who wins in November. 

S&P 500 Index

+1.51%

 

Communication Services XLC

+1.92%

 

Consumer Discretionary XLY

+2.21%

 

Consumer Staples XLP

+0.39%

 

Energy XLE

+0.16%

 

Financials XLF

+1.96%

 

Health Care XLV

+0.96%

 

Industrials XLI

+1.41%

 

Materials XLB

+1.10%

 

Real Estate XLRE

+0.13%

 

Technology XLK

+1.73%

 

Utilities XLU

 

-1.42%

Looking for Greater Participation

Market bears like to blame their woes on individual investors coming into the market. They suggest a horde of day traders that opened accounts for $350 bucks are shifting billions of dollars in action every day when that is not true.

There is a subplot to 2020 that includes millennials investing. Many of them are looking for big action, but billions of dollars are coming out of equities each week and going to the sidelines or taxable bond funds.  When this changes, the broad market will be off to the races.

Portfolio Approach

Yesterday, we added to Materials and lowered Cash to 5% in our Hotline Model Portfolio.

Today’s Session

The futures are pointing to a lower open after yesterday’s rally.  The momentum names are adding gains today, with Tesla (TSLA) marching higher, up over 43% in the past five trading days.

Operation Warp Speed

The U.S. government has awarded Novavax (NVAX) $1.6 billion to further their late stage development of a Covid-19 vaccine and to prepare 100 million doses of the vaccine. 

Regeneron (REGN) also received $450 million from the U.S. government to manufacture and supply the it with its investigational Covid-19 treatment. Regeneron stated said that if the FDA gives the experimental therapy an emergency use authorization or an approval, "the government has committed to making doses from these lots available to the American people at no cost and would be responsible for their distribution." 

 


Comments
Is the day trading causing so much volatility ?

Marty Mooney on 7/7/2020 11:51:44 AM
No, I do not think that's the case.  I think the experts that completely missed the rally especially those that missed it because they are hoping for a weaker economy (political reasons) are whining about an army of day traders.  Perhaps 10 million new millennials are in the market but most have accounts with $1,000 bucks or less.  Heck, $264 billion when into money market funds in the second quarter alone.   Do experts need to blame someone else for their boneheaded miscues.  Moreover, they are now openly rooting for individual investors to get hurt -with that old chestnut: "It ends badly."  As if a pullback, correction or crash would be the end...for me the it's beginning- time to make more money.  CP

Charles Payne on 7/7/2020 12:00:22 PM
 

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