Thursday was an interesting day in markets.  Another 5.25 million jobs lost (22 million in the last 4 weeks), a big drop in housing starts and Mr. Market looked right past those numbers to a rosier future.  Regardless, stocks opened with a slight gap up and then vacillated the rest of the day, closing back near where they opened.  As has been the case lately, the tech-heavy QQQ fared better than the other indices.  On the day, the SPY closed up 0.43%, the DIA flat at up 0.05%, and the QQQ up 1.82%.  All three printed indecisive candles, but the QQQ was the best of the three.  The VXX gained slightly to 40.74, while the 10-year bond yield fell again to 0.617 as money continued to chase safety in Treasuries.  Oil (WTI) fell again, closing below $20 at $19.58/barrel.

During the day, Eastern states decided to extend their shutdowns through May 15 in a coordinated decision among NY, NJ, PA, MA, CT, DE, RI governors.  In the Midwest, the governors of MI, OH, WI, MN, IL, IN, and KY announced they formed a regional partnership to coordinate their own regional economic reopening.  Out west, CA Governor Newsome promised new unemployment benefits and incentives to cover health workers who stay on the job.

After hours, BA announced it will resume production at its Seattle-area factories as soon as Monday.  This will include 27,000 employees (17% of their workforce) and all the returning workers will be required to wear masks, maintain social distancing and will be provided with both periodic wellness checks and contact tracing for anyone who does test positive.  This is the first major business reopening to be announced.

At the nightly event, the 3-phase approach for reopening the economy was announced.  The guidelines are short on definitions (for example, what exactly are “downward trajectory,” “robust testing,” or even “vulnerable people”).  However, ANY “one size does not fit all” plan would likely be short on clarifications.  The strategy basically looks for a non-specified decline in the rate of new cases to lead to the first phase of easing.  The plan puts most of the responsibility on states for decisions, testing, border control (to avoid cross-jurisdiction spread), etc.  

In an afternoon call to Governors, the President warned that states should also be prepared to handle new flare-ups of the virus after easing.  During that call, there was push-back to the plan, saying more testing should be in place before the reopening is launched.  Drs. Fauci and Birx have repeatedly said, testing, isolation, and tracing are the key to controlling the virus spread, as well as increasing public confidence. However, the President reportedly replied that more testing will need to come after reopening because a working economy is a priority.

For reference, the US now processes about 140,000 tests each day (more than any other country on a “total tests” basis, but still very low on a per-capita basis).  That amounts to testing only 0.08% of the American workforce daily.  So, even if just 10% of the workforce returns to “work away from home” AND we double US testing capacity, we would still only be testing about 1.5% of the active workforce per day.  Worse yet, these tests are a picture in time.  This means each worker may need to be tested many, many times unless or until an effective treatment or vaccine are available.  Is that enough? The President, Dr. Fauci, Dr. Birx, and the Task Force seem to think it could be.

Either way, the President made a tough decision that we can’t wait any longer.  When the Governors agree, we will start to reopen (probably along regional lines).  If that approach works, great! We’ll get back to some sort of new normal in 2-3 months.  If the plan causes a relapse, we’ll just lockdown again, and come up with a different approach.  Yes, some people may be lost, but we’re all going to die someday and there’s no way to say someone might not have died at home or from a trip to the grocery anyway.  Cold? Maybe.  However, there is no good answer for recovering without risk of relapse into a run-away spread.  So, we were always going to face this decision unless we decided to wait for a proven treatment or vaccine.  And that just isn’t in the cards from a political, economic, or general public patience standpoint.

On that treatment front, some VERY preliminary testing of a GILD drug was leaked Thursday night.  This leak showed the drug may have real potential benefits.  However, remember that this information is based on the results from only 25% of the study’s patients, was an uncontrolled (no placebo group) test, and looked at only one dosing level.  Still, it is a welcome ray of hope and should buoy market spirits (at least for GILD, which rose 15% after-hours on the leak).

Overnight, Asian markets were green across the board.  In Europe, markets are even more strongly green at this point in their day.  This includes the 3 major bourses (FTSE, DAX, CAC) all up about 4%.  As of 7:30 am, US futures are pointing toward a 2-3% gap higher on optimism about the new drug and economic opening. 

There is no major economic news for Friday.  On the earnings front, CFG, KSU, PG, RF, SLB, and STT all report before the open.

The uptrend remains in place, but gaps and volatility also remain the norm.  Optimism seems to be the rule of the morning, but we are also headed into another weekend.  So, traders need to continue to be very attentive, and either be very fast (day trade) or very slow (long-term holds).  Be very cautious on any swing trades you take in a news-driven market.

Ed

No Swing Trade Ideas for your consideration and watchlist on Friday. Trade smart, take profits along the way and trade your plan. 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.

🎯 Mike Probst: Rick, Got CTL off the scanner today. Already up 30%. Love it.

🎯 Dick Carp: the scanner paid for the year with HES-thank you

🎯 Arnoldo Bolanos: LTA scanner really works $$, thanks Ed.

🎯 Bob S: LTA is incredible…. I use it … would not trade without it

🎯 Malcolm .: Posted in room 2, @Rick… I used the LTA Scanner to go through hundreds of stocks this weekend and picked out three to trade:  PYPL, TGT, and ZS.   Quality patterns and with my trading, up 24%, 7% and 12%…. this program is gold.

🎯 Friday 6/21/19  (10:09 am) Aaron B: Today, my account is at +190% since January. Thanks, RWO HRC Flash Malcolm Thomas Steve Ed Bob S Bob C Mike P and everyone that contributes every day. I love our job.

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