E Market Briefing For Tuesday, May 25

Seasonal bias kicked-in, to the upside, ahead of Memorial Day, primarily it seems led by rotational rebounds in the usual suspects of momentum stocks, but also as Oil moved above 65 / bbl, suggesting rising global demand.

For the most part this rise conforms with our expectation of stable-to-firm Oil (OIL), and of course the economic benefit from global reopening is identified by the major institutions that more recently got bullish on Oil (we are since under 40 and we would not chase the upside even as we hold higher levels unfold).

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Rising demand matters slightly, as almost all the major financial media ignore rising COVID case levels. Complacency prevails as those might be threatening to everything from Semiconductors (SMH), as Taiwan hurriedly locks-down again, or Japan, where Tokyo's hearing renewed calls to shut-down this Summer's Olympics entirely, rather than just do it without visitors or any spectators at all, aside the athletes and associated staff. (I suspect there's more than a health concern here, Japan will lose an even-larger fortune if the Olympics are held without spectators, versus concern about actual 'games' as well as important milestones for the athletes. Will they postpone it yet again?)

Executive Summary:

  • Seasonal pre-holiday upside S&P tendencies kicked-in as expected.
  • COVID is also kicking-in, especially in Asia, and can surface to impact markets, if global economics are again disrupted (think Taiwan).
  • There's way too much complacency about COVID, it is only this evening that the State Department suddenly issued a warning NOT to travel to Japan, not simply for the Olympics, but in-general.
  • This is a big deal, Japan is not India (which has a travel advisory), and Japan was very low in positivity, and look what can happen, perhaps the geniuses in Washington (and CDC Atlanta) already know the risks of this returning in the Fall, although fingers are crossed that we avoid that.
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William K. 2 weeks ago Member's comment

The markets will continue to do what greed and fear push them to do and the result will continue to be those jaggedy graphs wandering up and down.

And certainly the virus had a bit of help in developing, and probably it was fairly accidental that it got out at that time, not part of the plan.

My solution would be an airtight border closing right away. If all of the fools in various positions in various countries had acted as they should have, probably most of the deaths could have been prevented. But stupidity prevailed and so did the spreading among all. And it does not appear that stupidity can be "fixed."

Adam Reynolds 2 weeks ago Member's comment

While I agree, wouldn't shutting down the borders have not only stranded many Americans in foreign countries? It also would have devastated our economy even further and prevented the import/export of goods.

William K. 2 weeks ago Member's comment

Certainly shutting the border would have stranded a few INFECTED carriers outside some place. And certainly it would have had some economic impact. BUT it would probably have been far less than what we can see has happened instead. Putting out a small fire is always easier than waiting until the whole city has burned.