Unease on Display… After yesterday’s seemingly optimistic approach to rising virus cases fizzled into the close, the real sense of worry underlying the market is on display front and center today. The latest virus headlines have delivered a fresh dose of reality too heavy to shrug off, with the situation continuing to worsen in Texas / Florida / California and NY / NJ / CT completing the karmic circle by announcing a mandatory quarantine for visitors from higher risk states. Indices attempted to rally off the low midday but are on their way back down again as sellers continue to puke out Value / reopening names (JETS -5.9%, RCL -12%, BKX -4.7%) and with FANG opting not to ride to the rescue today.

Wrong Week (Months) to Quit Sniffing Glue…With that little political misunderstanding out of the way (See: Peter Navarro), risk-assets resumed their price appreciation today, balancing hopes of continued reopening on the economic trajectory, with  new home sales surge (but  disappointing existing home sales) and concerns over new US COVID-19 case growth. Though it is worth noting that market participants seem to only care if hospitalization rates actually increase. Nevertheless, equities are higher yet again led by Cyclical/High Beta/ Value names. However, one place to keep watch? USD. The easing is pleasing to many, but not all.. Clearly there will always be second-derivatives of any USD move, some market friendly, some less so. The culmination of all of these things TBD by next week’s month and quarter end. Duh duh duhhhh….

Summer is Officially Here… and it’s trading like it too. Expiry is in the rearview mirror, meaning equities should be free to trade with fewer constraints, but once again a lack of new news has resulted in a lack of conviction that saw the S&P get off to a slow start the week. Indices are now attempting to push higher midday on back of the tech mega-caps: Apple (AAPL +2.2%) is leading the charge as its Worldwide Developers Conference kicks off… given Apple’s store re-closing announcement on Friday, it’s a fitting illustration of investors trying to shrug off 2nd wave fears in the name of sticking with what’s worked

Witching for the Weekend… It’s been a busy week of headlines but none have really packed enough punch to point to whether stocks’ next big move will be up or down (or spark a pickup in volumes the last few days). Regardless quad-witching is the story of today, with quarterly expiry meaning it’s not worth reading too much into today’s trading action as a gauge of sentiment. Still, pesky 2nd wave fears continue to pop up, with word Apple (AAPL -1.0%) will be re-closing some stores in states with growing virus cases sending indices into the red within the last 2 hours.

Flip a coin – Markets are now at an interesting intersection.  They have bounced nicely looking forward, but it will take time for the economy to heal.  Yes, indicators are showing that the reopening is helping, but at some point the low hanging fruit will be harder to reach.  Volumes have been trending lower recently (yesterday was down 23% versus 5 day average), and that can be an indicator that investors are unsure what to do next. The S&P 500 is trading at 3100, Nasdaq is close to new highs, and the Fab Five have three companies with market caps near $1.5 trillion.  How long can Buy the Dip hold?

A Familiar Routine… When World War 3 is literally trending on Twitter and futures are in the green, you know stocks are back in their groove of “focus on the good, ignore the bad.” But while reopening remains apple of the market’s eye, signs of progress (NYC Phase 2 coming Monday!) don’t seem to be eliciting as much exuberance as they did previously. The scars of last Thursday’s plunge are visible: the VIX and gold remain elevated, USD has stopped going down, and the S&P is back to counting on FANG mega-caps to drag it higher today (AAPL new ATH). So while the narrative is the same, the grind higher feels different…

“I’ma Need Some Whiskey Glasses…Cause I don’t wanna see the truth…” That may be because the truth is being completely warped by the quite visible hand of the Powell print. And the Trump Administration (a cool $1 trillion anyone?!). And economic data, which seems to be about as misleading as they come. How is it possible that retail sales are up so much M/M?! Recall they came from a very low base — down 16% in April meant a snapback was not expected and unsurprising. Also, people are possibly now spending their government signed checks, which could be a one-time event. However, skepticism is running rampant in regards to what is formerly known as “the market,” which is leaving fund managers in the latest BofA survey asking how far is too far. 78% of the managers surveyed see the stock market as “overvalued.”

Defying Gravity…The markets are “through accepting limits cause someone says they’re so…(h/t Idina Menzel).” Despite second wave corona concerns peppering headlines over the weekend, US markets moseyed their way back into positive/neutral territory over the course of this quiet (volume-wise) Monday. The move was already heading from bottom left to top right before Citigroup’s U.S. economic surprise index was revealed to have surged to the highest level since 2003 inception, and before Reuters reported the U.S. will allow American companies to work with Huawei to develop standards, despite its blacklisting. Not to mention the 2pm announcement that The Fed’s going to buy a broad based portfolio of US corporate debt. That’ll do. The leaderboard includes tech and consumer discretionary, as well as oil, which reversed early losses. This week there are an array of potential wrenches to be thrown into the mix, ranging from retail sales to quad witching, but the way things have been going it seems fighting the tape (or The Fed) is in not in anyone’s best interest.

BTD? If you just look at the final tally for yesterday’s selloff, it was an ugly outcome.  But the intraday charts showed the broader equity indexes (conversely for bonds) trading in a diagonal top left/ bottom right pattern.  Hence, it appeared to be a systematic decrease in risk (because of Powell’s remarks?).  The trading trend has been to buy the dip, and today’s early action was exactly that.  The S&P opened +2.7%, but the early support has diminished and stocks have retreated steadily all day.  Value is outperforming, but more sectors are turning red (see above).  The S&P 500 200 day moving average is 3013, and the index is just below that level now.  Could the markets see a shift from the recent BTD trend?

Doctor Jay… Picky Fed-watchers apparently wanted to hear only about the medicine, not the illness. Dr. Powell checked all the boxes on reiterating the Fed’s policy prescriptions, but his less than peppy prognosis for the sickened US economy’s recovery was enough to make jittery investors to lose their patients. Certainly some profit-taking is warranted given the rush higher (recently hot rotation sectors are the biggest underperformers), but taking a wider view FOMC + FOMO remains in place as a dangerous combo to pick a fight with.