The S&P 500 ETF (SPY) is indicated to gap-up higher at the open for the tenth time out of the last twelve trading sessions. That is a remarkable run, especially when it occurs in the context of the worst health and economic crisis that any of us have ever experienced. Even in fast and furious bull markets, there is seldom that much consistency in the positive price action.
Traders will be looking to see if the monthly jobs news that is out at 8.30 a.m. ET has any impact on this exuberance. The huge number of weekly unemployment claims has had no impact lately, but on Friday morning we are going to see if the loss of around 21 million jobs, and an unemployment rate of 16%-17%, has any emotional impact on the market.
The price action of the last several weeks seems to indicate that the market has already completely discounted any and all economic weakness and is now well on the way to anticipating a robust recovery. It has been a remarkably quick discounting of a crisis, but we have never had this sort of monetary expansion before.
There are trillions of dollars sloshing around out there looking for a place to go, so it doesn't take much of an effort for market players to find justifications for buying. On Thursday, virtually every asset class was higher -- bonds, equities, Bitcoin, precious metals and a variety of commodities.
The great difficulty of this market isn't understanding the dynamics that are driving the unusually robust price action, but finding ways to navigate it. Simply chasing the momentum is working right now, but this approach carries substantial risk. The likelihood of some sort of pullback is very high.
Understandably, there is a tremendous amount of FOMO (fear of missing out) in the market right now. With this series of gap-up opens and steady buying, it is impossible to not wonder if this is going to continue to be just another massive V-shaped recovery, which completely dismisses the significant economic dislocation that is taking place.
It is easy to take the view that all is well, as the central banks do everything they can to prop up the economy, but logic suggests that there should be some doubts and worries along the way that will shift the recent lopsided action.
We shall see what the reaction is to the jobs report this morning, but momentum traders are anxious to continue the recent run, FOMO is running rampant and the focus is on the positive news of reopening the economy. It is often said in bull markets that the trend is your friend. This may still be a bear market for the bulk of the stocks, but the trend is to the upside.