The Dow put on 780pts or 3.4% while the S&P500 moved higher 3.4% too to 2750 now within the first and second range as shown in the chart below. It would appear that we have entered Bear Phase 2 relief suckers rally. The characteristics of this bear unlike others appear to be swift so it has been a swift downturn followed by a swift upturn that could well be shortlived and we could enter Bear Phase 3 even sooner but that is a conjecture at this stage.
The S&P500 is at 2750 which is just 19% below its all time high. And I stress its all time high! Under normal conditions without this crisis, a 20% discount from a highly expensive peak point is considered warranted. The S&P500 is back to just early June 2019 levels, does this make sense to you given the multi-dimensional crisis we are facing that is severe, pervasive (across all sectors) and potentially protracted without known end points and boundaries? Early June 2019 was a couple of months just before the market got wind of the inverted yield curve phenomenon! Everything was great then before the inverted yield curve, the trade war, the repo blip and now the virus pandemic. While the market displays resiliency, it also goes to show that market participants may be somewhat delusional , or the reality may be something different. The market may be driven higher with algo trading (not retail participation) and short squeeze which provide the fillip to the rising intraday trend.
Would you pay more or the same for a car that got into a severe accident just months after you proposed to buy from someone (not a friend) ? You wouldn't. But the US market is doing just that (at least on the broad indices level). Buying at this point is at best for trading purposes and does not give investors a good risk:reward proposition (not even for the longer term) because we still haven't got CLARITY. There is no clarity how this virus pandemic would end and would last, how prolong shutdowns or partial shutdowns remain, the degree of severity on the economy and corporate earnings and there is also no clarity if this pandemic could potentially lead to other pockets of crisis e.g oil sector bankruptcy crisis, emerging market crisis, bond market crisis, EU crisis and on and on. We are STILL at the early stages of this crisis and we still need to understand what ramifications this pandemic has on the interconnected global economy. Even on peak virus, it is by no means certain yet we have actually reached peak levels both in US and Europe, UK in fact is facing a very tough time.
Those who follow this thread would know my position is that of Protect, Protect, Protest (just like Test, Test, Test) . I hedge my long positions (super+modest amount of long equity positions) with BBUS, BBOZ while I carry some GEAR at the same time. I am not shorting in the market for profit, because shorting individual stocks can be just as bad as buying individual stocks at this point. Bear ETFs in appropriate amount to hedge and protect my long positions act as insurance, I don't need to worry about getting the timing correct on a day to day basis (of course I try just like everybody), if it is wrong, with my conviction I know it would be right eventually in the months ahead if history is any guide. But if I am still wrong, well consider it as insurance premium (thus one shouldn't be buying big amounts especially if it isnt for hedge protection: you would be gambling otherwise).
Stocks Bounce On 'Peak Virus' Hope Despite World's Deadliest Day Yet
by Zero Hedge
Wed, 04/08/2020 - 16:01
After the deadliest virus day in the world yesterday, today started with optimistic comments by Fauci about a turning point and the total deaths likely be lower than predicted... only to be crushed by the deadliest day ever in UK, the deadliest day ever in New York and New Jersey, and Italy new cases re-accelerate... and the biggest plunge in consumer confidence ever... and the lowest home purchase mortgage applications.
Worst day yet... Source: Bloomberg
Screw it - buy Mortimer buy... it appeared that the algos had already made their mind up as every dip was bought today back to yesterday's highs... Source: Bloomberg
The market ripped all day but once again - in the last hour there was some weakness again...
Notably The Dow and the S&P made lower highs today...
As Bespoke notes, the S&P 500's close above 2684.88 today means we are in a new bull market, and each of the last three bull markets (starting 11/20/08, 3/9/09, and current) will have entered bull market territory within 12 or fewer trading days of the bear market low.
Another epic 3-day short-squeeze deja vu all over again... Source: Bloomberg
VIX refuses to play along with the bullish pump... Source: Bloomberg
Look over there!
Oil prices mirrored yesterday's contract-roll/settlement puke by going vertically higher around 1430ET... WTI settled around 6% higher because of the Algerian Oil Minister, the same day the EIA reported the largest ever inventory build... Gold was flat on the day... The Dollar was also flat on the day - roundtripping overnight gains to end unchanged... Source: Bloomberg Treasury yields were mixed today with the short-end outperforming once again (2Y -1bps, 30Y +7bps)... Source: Bloomberg
While the moves have been of note, we remain rather range bound still... Source: Bloomberg
The yield curve steepened dramatically...
Source: Bloomberg
Cryptos held on to their gains today... Source: Bloomberg Finally, despite every economist knowing what a bloodbath it was likely to be, economic data has still massively disappointed expectations... Source: Bloomberg
And fun-durr-mentals don't matter again... Source: Bloomberg
And don't forget its jobless claims day tomorrow (and Friday is closed in the US and Europe, and Europe is closed Monday).
