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The Stock Market May Be Living In Fantasy Land At The Moment!

This column is my opinion and expresses my views. Those views can change at a moments notice when the market changes. I am not right all the time and I do not expect to be. I disclose all my positions clearly listed on the page, and I do not trade my account on the stocks spoken of in this column unless fully disclosed. If that does not work for you stop reading and close the page. Do not bother me or harass me.

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April 8, 2020

Stocks – SBUX, DIS

Macro- SPY

Stocks rallied yet again and are about 19% off their highs at this point, so the S&P 500 has done a lot of work to repair the damage from March. The Fed minutes didn’t read particularly well, and my key take away was that the US economy was deteriorating by the middle of March.

S&P 500 (SPY)

The S&P 500 is either living in la-la land or being assisted by all the liquidity the Fed is pushing into the system. It seems reasonable to think that the liquidity from the Fed is undoubtedly giving the S&P 500 a needed boost. But at some point, earnings and fundamentals will matter, and the market is not cheap at current levels. I’m sorry. Maybe I’m not the perma-bull some of you thought I was.

I don’t know what to tell you, read the Fed minutes, they give you two rather bleak scenarios. In the first scenario, the Fed paints a picture where an economic recovery first STARTS in the second half of this year. In the other more dire situation, the recovery does not get underway until next year.

Tomorrow we get a lot of economics thrown at us. The most important will be initial jobless claims at 8:30 am, which are expected to be 5 million, with a range of 3 million to 7.95 million. This is on top of the nearly 10 million we have already lost.

Then at 10 am, we get consumer sentiment, which is forecast to be 75. To top it all off, we get Jay Powell speaking at the Brookings Institution in a Q&A session.

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S&P 500 (SPY)

The S&P 500 is attempting to break a downtrend, but with tomorrow being the last day of the trading week, it is anyone’s guess as to what happens. The S&P 500 could easily retrace lower or just easily keep moving higher towards 2,900. Again, I continue to see bearish betting in the options market, and the fundamentals and economics support a lower valuation for the index. But we know that in the short-term the equity market is capable of anything. Premium content – Another Interesting Day Lies Ahead

Both the RSI and the Advance/Decline support the bullish momentum at the moment. Premium content – I Still Don’t Trust This Market Rally

S&P 500

Starbucks (SBUX)

Starbucks cut its earnings guidance for the fiscal second quarter again. On March 15, it cut its guidance BY a range of $0.15 to $0.18. Now today, it cut its guidance TO a range of $0.28 to $0.32. To give you a sense of how much the earnings have been impacted, on February 12 of estimates were for $0.60. The stock is trading down by 2% after-hours. I still think this one is likely to fall to around $60.

sbux, startbucks

Disney (DIS)

Disney is jumping after hours on the news; it now has 50 million subscribers. That’s nice, and all, but the revenue they generate from Disney+ isn’t likely to even out the revenue they will be losing from theme parks, movies, etc. Again, be careful here.

disney, dis

Anyway, that is going to be all today.


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