Absorbed supply was key on Monday, as a morning dip was reversed in a very satisfactory fashion. Suffice to say bears are 'rotatingingly' capitulating by buying stocks, including some prominent permabears.

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Interesting.

Geopolitically .. you had media coverage of the Ukraine's Zelensky visiting the Pope in Rome, the German leaders in Berlin, Macron in Paris and even called on London. While this (preparation for closer ties with Europe and supplies for sure) is fine, there's more afoot. 

A number of air-defense missiles were flying in Russia, more so than Ukraine over the weekend. Notice that drones were reported operating near Moscow and far-away St. Petersburg too. Russia lost 2 helicopters and 2 jet fighters shot-down .. and it's possible wreckage(s) crashed inside Russia 'or' Belarus.

The dictator of Belarus was 'absent' at two of his National weekend events. In the middle of Monday he put Belarus military on alert, which might be political or diversionary cover for something else going on... if he's not overthrown yet. (Of course we would like to see him overthrown and a democracy established as the people of Minsk tried to achieve several years ago, without success.)

The Belarus security environment is volatile, and could deteriorate quickly due to a Russian military presence along their border with Ukraine and the military conflict. Russian forces are again conducting military operations from Belarus, which has heightened regional tensions. If Russia's trying to counterattack yet again, it could reasonably be considered planned from Belarus. The people of Belarus really don't want this and 'might' be agitated enough to try stopping it.

In-sum: 

The domestic economic 'tone' is not as negative as analyst views that generally perceive the Nation going 'into' recession, rather than emerging. In our view it's been there, although higher rates yield tighter margins that for the near-term are reflected bu disappointing earnings. But not across the Board.

Depending on the stock and sector, bad news is bad news, whereas for small caps that 'are' at the point where 'technology and adoption intersect'.. well that's a point where bad news typically is good news, because high expenses just before revenues (so hence profits) commence rolling in is normal.

That was clearly the case for AEHR last year, and I believe is for SOUN right now (it's in that transition point). Others may remain pending (BBAI but that L3Harris contract seems potentially huge), while some (like LLAP or LPTH) are still waiting for a point where investors look beyond a current picture and see a brighter path forward. 

We are not in a late-cycle mode that some claim. Rather that was last year as well as our 'head & shoulders' (inverse) bottom for S&P. Note that besides the view that shakeouts in May are for buying, not selling, we see some buying in a few of the smaller stocks we hold, since the big plays like Chevron, AMD or Apple are quite expensive stocks these days, even if/as then advance more.

I've noted that although Goldman Sachs filed as a 5% holder of AEHR Test Systems (pick of the year from around 7 well over a year ago), they are now a holder of over 6%, which suggests they've been buying during ensuing dips. I also see increases in holdings of BigBear.ai and SoundHound especially, by a few hedge funds as well. All 3 were active and gained nicely on Monday.

I was on a Canoo (GOEV) conference call. Not much new, since we knew they had the Oklahoma City factory purchases (by the CEO's family fund), leased to the company, but didn't know they expect a 20,000 run-rate production this year and 40,000 next year. They may also have forthcoming news about other companies using their platform (that was interesting if entirely vague).

Shares remain suppressed, but while it's a long climb-out with changing EV (a focus on SiC and newer battery) technology as well, they will likely make it. It hasn't been a focus stock but we do hope they achieve positive cash-flow in a year or two, at least that's their plan. Shorter-term we're more focused on AI. I did notice the CEO referenced their 'work-forces in Oklahoma and California', and I didn't hear Arkansas (though you never know with their WalMart deal).

It was refreshing to hear CEO Tony mention that NASA astronauts will start their voyage 'in a Canoo'. That's expected, their 'order book' is strong' and if they have a good agreement ahead with a Fortune 500 retailer (automotive or general merchandiser??) then it can move higher with perhaps a bit of gusto. I view it as a back-burner stock still, but one that's likely to be a survivor now.

Bottom-line: 

We got a pretty substantial S&P and Nasdaq turn from dip to a rally Monday morning, even as much of the rest of the day was sideways with an upward bias. Several smaller-cap stocks were particularly notably better.

While the media (and Janet Yellen) worries about the drop-dead-debt-day, it's delay would be increasingly severe, but still unlikely to be the case. POTUS is going to G7-Japan next week I believe, and I suspect the debt issue will be a resolved factor before his departure, at least in some acceptable manner. The stocks market is stronger than the S&P as more bears are 'scared into longs' it seems. Expecting stability within the neutral range for the next day or so.

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