Bulls Set to Ignore Economic News Again

As mentioned yesterday, the bulls paused Thursday.  Bears might try to argue that resistance held, but the candles don’t exactly scream “failure” since all 3 major indices printed indecisive candles (Doji or Spinning Top).  More to the point, there was no power behind any bearish move to this point.  On the day, SPY closed down 0.25%, DIA closed up 0.05%, and QQQ closed down 0.71%.  VXX was also flat, down slightly to 30.85 while the T2122 4-week High-Low Ratio climbed again to 98.84 (extremely overbought).  10-year bond yield rose to 0.823% as money left bonds, while Oil (WTI) rose just a bit to $37.32/barrel.

Before the open, initial jobless claims were worst than expected (1.877 million vs 1.7 million estimated) and continuing claims have reached 21.5 million.  This has led to expectations that the May Unemployment rate will exceed 20%.  However, the Fed also increased (initially $500 billion) and extended the length of its bond-buying program through at least June 2021.  Elsewhere, the White House said they expect the next stimulus bill to be about $1 trillion, despite Senate Republican objections to any more stimulus for now. 

In business news, after the close, AVGO warned of weak demand for smartphone components in their conference call.  F also decided to postpone the return to work of salaried workers until September.  In addition, JCP announced it will close 154 more stores as part of its bankruptcy exit plan and the largest mall operator in the US (SPG) is suing GPS over skipped rent payments the last couple months.

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On the Virus front itself, the global headline numbers are 6,726,982 confirmed cases and 393,616 deaths.  In Spain, a new study found that 5.2% of the population has virus antibodies (has had coronavirus). Meanwhile, France reported that its outbreak is now “under control” largely because the public has accepted and worn masks.  In the UK it was announced that public transport operations will resume on June 15, but all riders will be required to wear masks. 

However, in the US, where the spread has been the worst, we have 1,924,189 confirmed cases and 110,179 deaths reported to date.  The Director of the CDC told reporters he is seeing far too many people not following CDC guidelines for reopening, including not wearing masks or maintaining any social distance.  At the same time, the 4 largest air carriers are increasing their number of flights 27% in June, albeit at a reduced capacity per plane. 

Overnight, Asian markets green across the board again.  European stocks are looking to follow suit, up 1%-1.5% as of midday.  At 7:30 am, US futures seem to be falling in-line with the other regions, as they are pointing to a significant gap higher of between 0.8% and 1.2% with just the NASDAQ futures lagging (only pointing to a 0.4% gap up).    

Friday’s major economic news includes May Hourly Earnings, May Non-farm Payrolls, May Participation Rate, and May Unemployment Rate (all at 8:30 am).  The only earnings reports of note is TIF before the open.

The bulls remain in control, even as Thursday saw a pause.  It looks like they want to take markets higher, at least at the open.  Expected bad economic news seems no problem again and while protests continue, they are peaceful in a vast majority of locations.  Continue to stay focused on the short-term chart and don’t hesitate to lock in profits.  Remember its Friday.  So, don’t hesitate to put some jingle in the bank ahead of the weekend news cycles.  However, don’t bet against the trend unless you’re doing it to hedge.  Above all, don’t chase or predict.

Ed

No Trade ideas for your watchlist and consideration on Friday. Trade your plan, take profits along the way, and smart. Also, don't forget to check for upcoming earnings. Finally, remember that the stocks/ETFs we mention and talk about in the trading room are not recommendations to buy or sell.

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