After the second quarter wrapped up on Tuesday with a strong finishing run, bearish market timers were looking for some reversals to kick in, but were disappointed once again. The FAANG names led stocks higher on Wednesday and then better-than-expected employment news gave stocks another boost to end the week.
There continues to be a battle between big picture bears that are convinced that the acceleration in Covid-19 cases will eventually be a major market negative and the aggressive short-term traders that keep finding strong speculative action. While the old-time Wall Street pros question the judgement of this new crop of short-term traders, they help to keep sentiment positive and provide consistent underlying support.
It is tough for the bears to gain traction with their macro arguments, when there are always dip buyers and aggressive pockets of trading action. Throw in the very market-friendly fiscal and monetary policy and it becomes very hard for selling pressure to last for long.
Earnings season is coming up and will be an interesting test of market sentiment. Do stocks like Amazon (AMZN) and Apple (AAPL) need big earnings per share beats to keep running higher or will the market be willing to look past short-term issues? The bears are convinced that much of this recent strength is unjustified and earnings will be the perfect catalyst to test that thesis.
There was a little late profit taking in front of the weekend, but technical conditions remain quite positive. Concerns about the Covid-19 growth is impacting the market briefly at times, but the issue is still being widely ignored by market players, despite the constant negative drumbeat in the media.
It is an interesting mix of action with a very loud negative narrative, but very positive price action. My approach is to defer to price action over predictions and that continues to work well.
Have a great Independence Day. U.S.A.! I'll see you on Monday.