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WKLY Round-Up thru Jun 5th 2020; Running with the Bulls

Hey Folks, Bulls continue to rip the markets higher….get my take on the current markets below;

Weekly Sound Bites

• The disconnect between the financial markets and the world around it has grown even deeper as we are seeing an ongoing fight between the bulls and the bears with the markets scoring its best weekly gain in 2 months led by small cap showing 8% weekly gains… Upside surprises in labor market data appeared to drive much of the week’s positive sentiment with Friday’s overall employment report showing employers adding back over 2.5 million jobs during the month of May with almost all analysts expecting a drop of over 9 million jobs…also hitting the wires this week was the ISM numbers and construction spending coming in better than expected…
• Some traders are looking for a Long-Short; Bull-Bear; Fear-Greed; Option Straddle that can play any direction from Volatility expansion to contraction and price rips and dips….what was the “buy the dips and sell the rips” mentality is now the “buy the dips and buy the rips” mentality….and of course this will come to an end but the FOMO (Fear of Missing Out) is keeping Bulls active while the Shorts are being Squeezed around the throat…A self-imposed price action wedgie is being inflicted upon many traders at this juncture…
• Earnings underlying the S&P could fall to $126 this year (PE of 25.34 at current price of 3193 in the S&P) from its close to $162 last year according to estimates by FactSet…But estimates show that S&P Earnings could shoot back up to $180 next year which would put the PE around 18 at current price levels…but keep in mind that the FEDs will spend close to 40% of the GDP to offset the pandemic and Congress could add another 35% of GDP in stimulus….so tis next 12 months most of the juice is provided by the US Government until the US economy is self-sustaining…
• The positive economic news also pushed the yield on the benchmark 10-year Treasury note to its highest level since mid-March. (Bond prices and yields move in opposite directions.) While resulting in a sell-off in Treasuries, the better economic data supported modest gains in the broad municipal market through much of the week… Meanwhile, the investment-grade corporate bond market saw steady demand from U.S. and overseas investors. Credit spreads—the additional yield offered over Treasuries and an inverse measure of the sectors’ relative appeal—moved tighter, with riskier market segments such as energy seeing the greatest spread compression.
• Also0 helping give buoyancy to the markets this week was the ECB increasing its pandemic emergency purchase program by EUR 600 billion to EUR 1.35 trillion, extending it until at least June 2021, and pledged to reinvest proceeds from maturing bonds until the end of 2022. The ECB kept its key interest rates unchanged and said it continues to stand ready to adjust all its instruments, as appropriate, to ensure that inflation moves toward the ECB’s goal “in a sustained manner.
• And while trade tensions between the US and China continue to simmer, U.S. Trade Representative Robert Lighthizer said on Thursday he felt “very good” about progress under the phase one agreement with China, which he said was honoring the pact and fulfilling its commitments on structural change. Lighthizer’s comments at a virtual event held by the Economic Club of New York were seen as an olive branch toward China.
Weekly Market Round-Up;

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