E Market Briefing For May 11, 2020

Economic 'fragility' - across so many sectors, and emphasized both by a series of heavy earnings losses and employment plunges, have surprised any manager or investor who failed to assume such concerns were offset, not across the Board, but by virtue of big-cap leadership taking S&P up.  


Of course there is suffering; and the S&P recovery is viewed by some as insulting; because economic dismay is staggering, along with Job losses; but that's usually because they failed to view 'the crash' in late February and early March essentially discounting that. Actual numbers typically only appear after-the-fact; when markets already look towards 'what's next'.  


For sure the market can be wrong; but in this case it's mostly technology in the leadership role. As that's the single 'must hold' sector (and has been of course), even though now it's again pricey; if we were to have a '2nd wave' of Covid (and we probably will depending on regional vulnerability; besides some areas opening without the 1st wave even being controlled or limited), I would suspect technology would hold reasonable corrections; because it's so clear how more reliance on online telecommuting or similar behavior is relied-on, the more tech is sustained. It's part of why I'd suggested the S&P likely heads to a correction soon; but not debacle.   


As to the projected (from March) upside behavior: lately it spread a bit into a broader context, generally indicative of views about a probable 'bridge' to recovery later in the year or next year; valid or not. Sure, it's not so simple; so investors shouldn't be overly complacent to the obvious ability of S&P to both remain in our upside target range now for 3 weeks, shuffling between the 20-DMA and 200-DMA, as outlined every day.  


Aside this running-in short-sellers (or defeating their every attempt to 'fade' this market for more than hours or a day on-occasion), not that much that's particularly bullish has been displayed. In fact information available is very mixed, with regard to the distribution of 'Covid' concerns and cases around the Country; helped by optimism surrounding a number of promising drug and vaccine trials; though the slight relaxation is mostly 'hope-based'.  


So sure, there is a bit of complacency as 'more cases' are reported given a rise in testing, along with more people presenting with symptoms. Pundits may speculate that the United States situation is trying to emulate Sweden; but it's not so impressive if you compare Stockholm 'morbidity & mortality', with that of New York City. So yes they have an educated compliant fairly healthier population to start with, and are tolerating things pretty well. But I would not take much solace from that with respect to rapid re-opening here as regards expectation to somehow avoid problems, other than seasonally better prospects 'if' rising temperatures help diminish spread (unproven).  


Summary points this weekend (first directly about the markets):  

  • S&P remains extended; but weeks of range-bound trading allowed it to ease a previously overbought status; which combined with broadening of participation somewhat, allowed this higher level range to persist;
  • It's hard to say this high-level stability is a plateau from which S&P can launch a further advance; but the advance fights ample skepticism and oddly enough that assists it holding together, for the moment;
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