The Dow recuperated from this morning’s 700-point decline, slowly rising to end with a 150-point win, despite renewed fears surrounding a spike in COVID-19 cases. The S&P 500 and the Nasdaq also clawed their way to modest daily wins on a Federal Reserve announcement that it would buy individual corporate bonds. A similar announcement helped dig markets out of their March trough as well. Today’s update extends on this program, indicating the central bank’s continued support of credit markets.
Bernie Schaeffer, Schaeffer’s Investment Research, SchaeffersResearch.com, 800-327-8833, June 15, 2020
Long Term is Bullish
Stocks crashed last week, led by smaller caps. The Federal Reserve kept interest rates unchanged, and surprised nobody by saying the pandemic has slowed the economy. It says the short term is extraordinarily uncertain, but its long-term forecast is unchanged. After a big rise, stocks needed to correct.
The same factors that created the rise from March are still in place. Yardeni’s formula: TINA + MMT = MAMU. It means: “there is no alternative” (to stocks) plus modern monetary theory (with QE4EVER) equals the mother of all melt-ups.
The coronavirus trajectory is a mystery. Some areas got lucky, others did not. Such uncertainty will persist, which should keep financial stimulus coming.
Jason Kelly, The Kelly Letter, jasonkelly.com/kellyletter, June 14, 2020
Bullish, but Safety First
Breadth isn’t the only bullish signal emerging from the technical indicators. A lack of downside leadership has also propelled the bullish “Selling Vacuum” component [*1] of our Negative Leadership Composite well past the +20 threshold. This alone has been a historically positive sign, but signals are even more reliable when breadth confirms simultaneously, as it is currently. The technical situation has steadily improved and is indicating that equities will likely move higher for the foreseeable future. That being said, the many persistent risks in this environment compel us to maintain our defensive stance in line with our “safety-first” strategy.
James Stack, InvesTech Research, www.investech.com, 800-955-8500, June 5, 2020