Re Open vs Re Close

It feels to us as though the market ran out of steam last week. The more positive news regarding re opening that came after the Powell announcement that things were not going to bounce back as quickly as hoped, seems to have run into a wall. The latest news at the end of last week and over the weekend is more focus on increasing cases in many large states. Apple announced on Friday that they were closing some of their stores in key states, was a blow to the market late Friday afternoon.

We think this story line will be the focus in the week to come.  The market is priced for the re openings to continue and for the U.S. economy to see unemployment fall and the economy strengthen. It seems to us that there is little room for error. There may be good news on the trade between China and the U.S., but higher purchases of farm products will not help unemployment very dramatically.

Last Week:

More positive macro data, re opening expectations vs Fed caution and virus uptick, led to the S&P closing up 1.9%, VIX down 7, Crude up, Gold higher on the week.

Equities across the globe were mostly up 1% to 2%, Investment grade debt, HY debt and EM debt all put in positive performances

This Week:

Focus on Covid- 19 outbreaks, U.S. data: Personal consumption, Home Sales, unemployment claims and EU governments plans for debt backed stimulus.

We look for a risk off start to the week, with equities trading lower and credit trading higher yields. We look for Gold to remain firm and oil to hold gains.

We are not ultra-bearish here as the authorities continue to throw everything at the markets, and this looks to continue, but we think this week looks as though we will see corrective price behavior.

Hat tip to BP for the picture below as I think is summarizes the view of the markets. We are trying to decipher what event or series of events is enough to threaten or override the current, buy everything regardless of valuations, as the central banks have your back, market we are seeing now.

Goldman on Gold:

S&P 500

We wrote on Thursday last week we want to be sellers on rallies to 3,150.  Friday saw the market test the level and on the news from Apple, saw a sell off into the close.  3,150 remains key resistance and 3.075 is important support. We look for a test lower to start the week.

Gold is knocking on key resistance at $1,745-$1,760.  We still look for higher prices in the months to come. Look to go long on break above resistance or on a dip to $1,710 level.

EURUSD is sliding lower as we wait to see if the EU can convince the frugal four that raising debt to give to the most needy countries is a good idea.

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TickerDate OpenedEntry PriceStopTarget PriceCurrent Price% Change
LONG Austevoll Seafood ASA (AUSS:xosl)2020/06/0276.7572.00SPREAD TRADE74.85-2.48%
SHORT Leroy Seafood Group ASA (LSG:xosl)2020/06/0256.75SPREAD TRADESPREAD TRADE54.80+3.44%

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