Stocks, bonds, gold, and bitcoin all traded higher Thursday. It is unusual for there to not be some rotation between those groups, but fear of missing out seems to be gripping all asset classes right now. Many market players are dazed and confused by the action. While they may be buying and enjoying the gains, many of them aren't convinced that the price action is justified.
It has been an odd brew of action with some standard bull market momentum trading, but there is also a series of weak closes, which is not how bull markets act. The selling has been consistent in the last hour but the gap-up opens have been even more consistent. That is not a typical bullish pattern.
Breadth today was very good with around 5,600 gainers to 1,800 decliners. New 12-month highs have expanded to over 100 for the first time in quite a while. That is still quite low, but it reflects the fact that only the Nasdaq is close to it 2020 highs.
The trillion-dollar question is, "How long can this action continue?"
The trillion-dollar question is, "How long can this action continue?" The bulls are confident that the Fed is all that is needed and they have been right for over a month now. Not fighting the Fed is still working and it is being augmented by a belief that there will be a new crop of leading names in the post-coronavirus economy. Those two factors are what is driving the action and there really is no way to guess how long that theme can persist. It is feeling rather frothy now, but only took a couple of days of selling to set up another thrust higher.
Tomorrow morning, we will see the April jobs news, which will show that over 20 million jobs were lost. Given the reaction to weekly unemployment that won't matter much, but we can't help but wonder if the market is going to be able to ignore economic reality forever. While the Fed can backstop many of the problems, there are some things that they can't fix. If unemployment remains elevated for many months it will eventually have some impact that can't be easily fixed.
This is highly unusual market action that no one predicted with any great degree of accuracy. There is no way to know if it will persist or if some other shift is about to occur. The best course of action is to stay flexible and reactive. Let others pretend that they know the future.
Have a good evening. I'll see you tomorrow.