Trading Journal (06.08.20)

It is only easy to know the results after the fact when it comes to the stock market. The SPY today easily added another +3 points to its total and closed 323 and change. If I was told in March lows were to be the bottom and SPY was to rally 100+ points in the next two months I would have laughed. Well here it is and its all thanks mainly to Central Banks providing the backstop for markets to maintain its grind higher. The upticks are continuing and can be seen in the likes of Boeing, bank stocks, airline stocks, oil stocks, real estate, and so on. Yet front chart of this post is a reminder of when the FED provided a backstop that the bottom of the markets was in. The so call quantitative easing when slowed or stopped the market struggled to make gains, yet when it is introduced all time highs for SPY was achieved.

It is not without doubt that in the next few weeks to months the country will be facing multiple head winds. The speed and effectiveness in opening the country back to full strength and will jobs come back or unemployment continue to stagnate and even increase, the protests against police brutality, the containment of the Coronavirus, US and China trade war, Oil price war, China' stance on Hong Kong and Taiwan are just a few of these head winds.

Rather than looking to far ahead just look at today was amazingly bullish for stocks. Bankrupt company such as Hertz was able to reach a high before bankruptcy was announced!

Isn't something to watch, Hertz was able to regain its April's highs in a matter of days after the company announce it was bankrupted. The value of the stock technically is worth very little since in bankruptcy share holders of the stock are the last to be given what ever is left in the company's liquidation. The bullish sentiment is so strong that the price simply got heavily bid through out the past week and even more amazing is it does not have signs of letting up.

Do not mistake the frenzy buying means all things are clear. The one sided trading of bulls will sooner rather than later revert which means lower prices. Why? There is a finite of people buying and if everyone is a buyer and once one sells the price can potentially gap down because the demand of buying has dried up. Although this is still an assumption a lot of stocks have MACD and RSI making lower highs even though prices are making a higher high. Divergence in technical does not mean prices have to go down but it will be something to look out for.

One last mention is last Friday's job report data come out as a surprise on the good side and chart below illustrates how good the surprise really was.

The fact that for over 3 months the weekly initial unemployment claims continue to be in the excess of millions the total amount of jobs created in the month of May was actually positive. So there were more jobs created than lost in May. Fantastic on the surface but looking at the chart one needs to scratch their heads and ask how is this even possible. Total jobs change is not even remotely close to the +2.5 million jobs as announced in month of May. At the end of the day the announcement whether true or not was enough fuel to take the markets across another resistance.

The FOMO is real and we are witnessing it first hand. When will this stop is the next bet to place because when it stops there it will be trend breaking and potential for it to be a fast move.

Posted Using LeoFinance