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WKLY ROUND-UP thru Jun 19th 2020; When Elephants Dance

Hey Folks, Happy Father’s Day weekend to all the dad’s out there….the markets have been celebrating since the March 23rd lows but will the punch bowl be removed? Get my take on the current market price action below


• Stocks recorded gains and erased part of the previous week’s steep declines. The technology-heavy Nasdaq fared best and briefly moved close to the all-time intraday high it established on June 10… The week ended on a volatile note due in part to Friday’s “quadruple witching”—the simultaneous expiration of four types of options or futures contracts, which occurs once each quarter… Reflecting the conflicting signals, longer-term Treasury bond yields ended the week roughly unchanged. The broad municipal debt market marginally outperformed Treasuries through most of the week…thus far we’ve seen the major averages up 4 out of the past 5 weeks…
• The Feds and other Central Banks are like Elephants dancing and when this happens the only thing that gets trampled is the grass; –or in this case the retail traders…or, as I call them “Rat Brain” Traders…there will be big debates in all markets over the next few years on the deflation vs inflation camp…there are always unintended consequences with very large debt and stimulus programs…NASDAQ currently trades at 3.4 times sales (more favored than P/E ratios for Tech)…the 10 year average is 2.3 so we are clearly overvalued showing momentum as pushed Tech much higher and is the second most richest since the Tech Bubble in 2000…The US Feds have extended the balance sheet form $4 Trillion to $7 Trillion in only a few months as it is buying Treasuries, Mortgage Back Securities, , Corp Bonds, Municipals and Bond ETFs…
• On Tuesday and Wednesday, Fed Chair Jerome Powell testified before Congress and urged that recent monetary stimulus be paired with more fiscal support. While no clear plans have yet to emerge, Trump is talking about a $1 Trillion Infrastructure plan… The week’s economic data offered mixed signals as to whether the economy will be able to manage a “V shaped” recovery. Also on Tuesday, the Commerce Department reported of a 17.7% surge in retail sales in May, better than double consensus expectations and the biggest gain in history—albeit one measured against the 23.3% cumulative decline over the previous three months…and on Thursday, the Labor market data disappointed, however. Weekly jobless claims fell less than expected, and continuing claims remained elevated, at over 20.5 million.
• Over in Europe Equities ended the week higher, supported by stimulus efforts and the reopening of key economies. However, a resurgence of COVID-19 cases in the U.S. and China cast doubt on a quick recovery and hindered the advance… The Bank of England (BoE) enlarged its bond-buying program by GBP 100 billion and left its key interest rate at a record low of 0.1%. It also said it would slow the rate of purchases… UK inflation slowed to a four-year low of 0.5% in May, from 0.8% in April…

Enjoy this week’s Round-Up;

Don’t Be A Rat Brain Trader – Be The Red Stripe Zebra !
Trade Smart !