Well that was a week of worrisome headlines (from World War 3 to global COVID-19 reawakening’s), awe-inspiring US macro-economic beats (which lose all context in relation to the collapse) as earnings outlooks remain just “off the lows”, and a stock market that refuses to go down despite bonds, the dollar, and commodities all signaling anything but strong growth ahead. Given the mean-reverting nature of the US macro surprise index (3 standard deviations above the mean), this could be as good as it gets. As signs of a virus resurgence mount, investors have turned increasingly cautious. The rally in those popular reopening trades — airlines, cruise lines and hotels — is seemingly losing steam. “The market was priced for a continuation of improvement and I think that’s overstating what’s going to happen,” said Brian Levitt, Invesco’s global market strategist. “We are going to have episodes of cases rising. We are going to have a very slow and uneven improvement in the jobs market.” After soaring more than 40% from the March lows, the S&P 500 turned sideways in the past two weeks, trading at similar levels to early June. The market, which used to turn a blind eye on disastrous news on the thinking that the economy had already bottomed, has become more vulnerable to negative economic headlines as the data begins to give a read on the shape of the recovery. Fed can’t prevent volatility. While the flattening virus curve played a big role in the market rebound, it’s no denying that the Federal Reserve’s unprecedented stimulus has been a key driver in lifting stocks from the COVID-19 slump. The central bank unleashed another weapon in its arsenal this week, saying it will start buying individual corporate bonds. As comforting as it is to have the Fed’s support, the central bank can only do so much to ease investor fears. Fed Chairman Jerome Powell reminded investors again this week at his semiannual testimony before Congress that “significant uncertainty remains about the timing and strength of the recovery.” Wynn Resorts (WYNN) – This sector will be under pressure in the week ahead. Look for short opportunities on ANY bad news that hits the markets. Bad news that is highly likely.
MGM Resorts International (MGM) – Basically the same as above. I believe this is the week to pick on these weaker stocks.
Boeing (BA) – Boeing failed to hold an important 200$ level last week after looking primed for a break out. If the Fed keeps buying bonds I will love this long. It should still head lower for the time being.
Global Airline ETF (JETS) – Instead of picking just one airline I’d much rather be in this ETF. Basically a basket order of sorts. I’m looking to short this bad boy in the upcoming week.
Norwegian Cruise Lines (NCLH) – My favorite stock from last week. I am sure the shorting will continue with literally no good news here other than another massive stimulus. People are not going to want to be confined on a boat in case of a break-out.
Zoom Communications (ZM) – Zoom is at all time highs but hasn’t been able to break through this consolidation zone. I am holding a position short for the long term. As far as a day-trade goes though, I’m surfing this bullish wave for as long as possible.
Wayfair (W) – Again I am longer term bearish on this stock. Only because it rose too quickly without investors really able to look into their financials and such. But just like $ZM, when it comes to the short term I’m riding this wave like a surfer.
