2020 is one of the most dramatic years ever for the stock market.
Many market players were stunned Friday when the number of new jobs created in May exceeded expectations by about 10 million. There were some technical explanations as to why economic forecasters were so wildly wrong but it was still so much better than anyone expected that the market jumped sharply on 4-to-1 positive breadth.
This surprising economic news occurred at the same time that there has been increased speculation and record volume in speculative stocks. Rookie traders using the Robinhood brokerage application are trading stocks much like what happened back in the heyday of the internet bubble. Even companies that have filed bankruptcy such as Hertz (HTZ) have been surging in trading that is tantamount to a Ponzi scheme.
Earlier this week there was strong rotational action out of many of the growth stocks that have been leading since the March highs. The money flowed into banks and industrials but there was also a "dash for trash" with airlines and other laggards jumping on speculative interest.
All of this action is occurring as the indices become grossly overbought and as protests and rioting occur across the country. Never have there been as many compelling arguments for a negative market reaction as there are now, but the fact that the negatives are so obvious may be part of the reason that they act as a driving force for buyers.
Buyers are obviously out of position and struggling to put idle cash to work. Bears are a constant source of short-squeeze fuel and, above all else, the Fed sends the message that there is still unlimited help on tap.
It can safely be said that no one saw this course of events coming and it is anyone's guess where we go from here. The good news is that this crazy action should continue to provide good opportunities for reactive traders that stay vigilant.
Have a great weekend. I'll see you on Monday.