The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
Keeps rolling
Overseas markets rallied. Overnight futures rallied. When positive headlines came out of Iran at 4:50 AM, futures lept higher. Crude dropped significantly. Yields fell across the curve. Precious metals popped. The Dollar fell. Surprisingly, Bitcoin didn’t really react. The S&P opened about +50 and climbed further as the day progressed. Capital flow was slightly elevated at 116%. The appetite for risk grew again today and the mood is cheery.
We don’t have any particular data points to discuss. The April ADP data (+109k vs +120k est & +61k prior revised from +62k) didn’t move markets. What’s the ADP data tell us? That the labor market is good enough. Investors liked that verdict and went about their usual business. Focus quickly returned to the likelihood of an agreement between the US and Iran as well as earnings season. That focus resulted in a melt-up.
At this point, markets are in a continuation mode. Maybe Friday’s nonfarm payrolls data upsets the apple cart but it seems unlikely. An unwinding of the US/Iran progress could certainly be a negative but the striking of a deal seems a more probable outcome. How much more upside could we see before momentum gives out?
I don’t have a good answer. Perhaps we peter out of upside energy next week? The thing is that the dip-buying community, as well as all the investors that *wanted* to dip-buy last time but didn’t, are going to *pounce* on any pullback that happens without a cataclysmic news event.
So a typical backing-and-filling or digestion of the recent gains seems unlikely. The speed at which capital acts on even small pullbacks will be remarkable and will therefore keep any and all pullbacks very shallow and brief.
The bears are an endangered species again. Even for the short term, they don’t have a chance unless something awful occurs in the world that greatly affects the investment landscape.
See you tomorrow.
-Mike
Visdom Market Commentary
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