Invest with the Fed

May 31, 2020

Weekly Market Outlook

By Keith Schneider

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U.S. equity markets improved their footing with most key benchmarks gaining more than 3% for the week. The NASDAQ 100 is up over 9.76% YTD, and the S&P 500 regained its 200-day moving average.

This recovery of the S&P 500 (after dropping more than 20% below its 200 DMA) is the fastest on record. However, do not get too excited and think we are out of the woods as the IWM (Grandpa Russell) is still down -16% YTD.

The Dow Industrials are -10% while the unemployment rate is currently at levels not seen since the Great Depression.

Clearly, we have two investing worlds or alternate realities.

By the way, it is not uncommon for stocks to rally on bad news as that is when the Fed is most accommodating.

This time the Fed has supported the markets to unprecedented levels by buying ETF’s whose holdings include Junk Debt.

So, you can choose the reality you prefer, but be prepared to change course on a moment’s notice and certainly do not ignore risk controls.

This week’s highlights are:

  • Risk Gauges are still bullish although they backed off a bit
  • The NASDAQ 100 is just +/- 1 ATR away from all-time highs
  • Biotech and Semi’s continue to lead and are looking to break out from two weeks of compression
  • Oil is showing good momentum on our Real Motion indicator and could bounce
  • Value and Small Caps themes could be coming back from the dead
  • Volume has picked up, showing bullish accumulation
  • Volatility ($VIX.X) still hanging onto elevated levels
  • Short-term sentiment is running rich as the number of stocks above their short-term moving average is frothy


Stay safe and best wishes for your trading,

Keith Schneider

CEO
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