The Great Dislocation is Snapping Back
As we pass Memorial Day weekend in America – the oft-assumed kick-off to the summer – most folks are completely confused by the "dislocation" of the stock market and the current picture of the disaster in the data that’s reeled off each morning.
And while the new season will likely clear that up a bit, let’s not forget the normal annual haze that accompanies this period of the calendar – though perhaps slightly different this year as the "Stay at home group" is still mentally staying at home.
With the vast portion of the earnings season just about done, it’s likely the worst of the earnings data is being embedded into the system via Q2 earnings as we speak, suggesting a very timely “summer swoon” to take advantage of from say mid-July to mid-August.
It’s no coincidence that this is the normal window for almost all summer swoons of the past.
Keep in mind that markets consider "better or worse," and "next" instead of "now"
The dollar is strong, and the US economy will come out stronger and better - building even more jobs in the New Economy.
The cleansing process washing through every company (small or large) across the land will set the stage for a launch pad more substantial than anything we have seen before.
It will look like a trade range - but it will be building a spring-loaded foundation into the future.
Long-term investors must continue to patiently let this work through the system.
TSA and driving data, along with the Apple high-frequency data, are all showing that demand and movement is coming back faster than expected.
Just check the recent spat over the specific topic of crude oil - for a 48-hour period one month ago, the crude oil negative price was the chatter of all economic data.
But nothing we were told to fear actually happened.
And energy companies that are going under are quickly seeing their assets bought. These are the fastest bankruptcy cases on record.
So, when you listen to all the bad news about dislocation, know that there is more money waiting to "fix" the problem than there are problems.
First, we are seeing a massive pipeline fill up with targets on vaccines and treatments.
As for improvements:
Current conditions have already improved to levels beyond the lows seen back in 2011, 2002/2003 and even the mid-90s slowdown.
The demand for cash is off the charts as per the above chart from Scott Grannis at Calafia Beach Pundit.
Now, call me a nut but this is BULLISH for the long-term investor.
That, my friends, is why the FED is active. The market wanted cash and it got lots of it.
And guess where it went?
Into the bank as noted below.
Record setting would be a huge understatement here.
Showtime may need to change their show title soon.
Ok, so the top 3 charts are your major Indices.
Trade ranges are evident in all but one of them, the NASDAQ.
Tech is showing us more and more each week that it is the underlying current - sped up significantly by this setback – that will run the future Economy we are heading in to today.
The last chart is the broader market NYSE Composite shows us where the core elements of importance are as we head into the summer.
So, as the press continues to scare everyone, know that Tech, science, speed, 5G, AI, robotics, space, human algo and life algos are the internal industries of the future.
We are only waiting for their moment to arrive.