FauxMo

Quick take: No Bias. Too much uncertainty.

Fear of missing out was the rally cry for many Bulls heading into Friday’s unemployment numbers. But apparently few were able to grasp the unexpected addition of 2.5 million jobs last month, which turbo charged shares even higher with the believe that a V-shaped recovery has been nailed in. 

For the week, the S&P 500 shot up +4.91% and the Nasdaq +3.42%. The buying was large and heavy with all sectors participating. 

The unexpected data miss from the “experts” has raised eyebrows. Perhaps the unfamiliar ground of shutting down the economy coupled with stimulus programs like the Payroll Protection Program has distorted economists visions. Perhaps the government’s history of errors in data plays a roll. 

What is clear is that the economy is mostly open now. What is unclear is how the economy will look when the stimulus runs out. The unemployment rate stands at 13% at them moment, down from 15% before Friday’s announcement. 

Stocks do not offer an attractive risk-reward scenario. Difficult to bet the market will continue to charge higher given valuations and the uncertainty of the economy – as well as the coronavirus.

The Dow, +6.81%, has been a big upside driver for the market as the hunt for yield continues. Dividends pay higher than treasuries. It’s hard to retire. 

Mixed signals with fund flows.:

While discount brokers have reported large inflows, many wealth advisors and fund managers haver reported outflows from stocks and into the safety of bonds. 

Large numbers of block trades Friday may suggest real buying. Funds available from quantitive easing will weigh in as will short covering.

For a change, the market is being led by non-tech names. Tech remains firm, with the FAANG and Microsoft stocks showing strength. But it’s the breadth of the rest of the market that has really stepped in of late. 

We may see some bad earnings reports in the second quarter, though the prospects are better for the second half of the year – IF the coronavirus does’t become a problem again. 

This pandemic market has created winners and losers depending on how well a companies model has allowed them to adjust to quarantines. 

There is always something to be afraid of.

Commercial Real Estate is threatened with with nearly half the rents not paid in May. Starbucks, TJ Max and Ross Store are among those who reportedly did not pay.

Wells Fargo (WFC, +19.64%) pulling back on auto and home equity loans is a concern for the credit market. Rental car company Hertz declaring bankruptcy is also worth taking note of for signs of a trend, or perhaps opening the door for other companies to succeed. 

TECHNICALLY SPEAKING

  • The S&P 500 is trending higher above major moving averages, and is abut 6% away from its February high.
  • NYSE about 25% higher than last week and the Nasdaq 40% higher. 
  • NYSE buy-volume dominating sell-volume by more than 4 to 1, Nasdaq more than 2 to 1. 
  • All sectors advanced, with Industrials (XLI, +7.12%), Consumer Discretionary (XLY, +7.06%) and Energy (XLE, 6.08%) the biggest winners. 

GROWTH STOCKS

Loads of high quality setups. We can see the 5G stocks making bases now, though they’re not qualifying with underlying fundamentals.

BREAKOUTS

Abbvie IncABBVPharmaceuticals
Autodesk IncADSKSoftware & IT Services
A. O. Smith CorpAOSMachinery, Equipment & Components
TopBuild CorpBLDConstruction & Engineering
Biomarin Pharmaceutical IncBMRNPharmaceuticals
Deckers Outdoor CorpDECKTextiles & Apparel
Danaher CorpDHRHealthcare Equipment & Supplies
Epam Systems IncEPAMSoftware & IT Services
GoDaddy IncGDDYSoftware & IT Services
Acushnet Holdings CorpGOLFLeisure Products
Howmet Aerospace IncHWMMetals & Mining
Horizon Therapeutics PLCHZNPPharmaceuticals
Lowe’s Companies IncLOWSpecialty Retailers
Livongo Health IncLVGOHealthcare Equipment & Supplies
Paycom Software IncPAYCSoftware & IT Services
Pool CorpPOOLLeisure Products
Thor Industries IncTHOLeisure Products
Trade Desk IncTTDSoftware & IT Services
UnitedHealth Group IncUNHHealthcare Providers & Services
Slack Technologies IncWORKSoftware & IT Services
Williams-Sonoma IncWSMSpecialty Retailers

BASES

American Airlines Group IncAALPassenger Transportation Services
Avantor IncAVTRHealthcare Equipment & Supplies
Brunswick CorpBCLeisure Products
BWX Technologies IncBWXTAerospace & Defense
Beyond Meat IncBYNDFood & Tobacco
Charter Communications IncCHTRMedia & Publishing
D.R. Horton IncDHIHomebuilding & Construction Supplies
DaVita IncDVAHealthcare Providers & Services
Floor & Decor Holdings IncFNDSpecialty Retailers
Heineken NVHEIABeverages
Hologic IncHOLXHealthcare Equipment & Supplies
J B Hunt Transport Services IncJBHTFreight & Logistics Services
Manhattan Associates IncMANHSoftware & IT Services
Microsoft CorpMSFTSoftware & IT Services
Cloudflare IncNETSoftware & IT Services
ServiceNow IncNOWSoftware & IT Services
Peloton Interactive IncPTONLeisure Products
SiteOne Landscape Supply IncSITEFood & Tobacco
Stericycle IncSRCLProfessional & Commercial Services
Atlassian Corporation PLCTEAMSoftware & IT Services
10X Genomics IncTXGHealthcare Equipment & Supplies
Ubiquiti IncUICommunications & Networking
VMware IncVMWSoftware & IT Services

The stock market has not reacted to the protests and riots across the country. That shouldn’t be a sign of uncaring, only that it doesn’t appear to be taking away from business. Many companies have stepped up and donated for the sake of ending racism.

Society will ultimately be better for all of this. As Martin Luther King said, “riots are the language of the unheard.” Hopefully a lot of listening will take place as response.

There will come a day where people are only seen by their good actions and bad actions. Skin color and culture will be irrelevant in the true judgment of a person.

Stay safe,

Dan