Volatility May Be High With Significant Downside Risk Starting This Week
Stocks rose sharply on May 5, well, until 3 PM. Then the Fed's Vice Chairman gave investors a harsh dose of reality.

The Stock Market May Have Been Handed A Harsh Dose Of Reality

MAY 5, 2020

STOCKS – DIS, C, BABA

MACRO – SPY

MIKE READING THE MARKET PREMIUM CONTENT – 

The S&P 500 rose by 90 basis points on May 5, to close at 2,868. It wasn’t as great a day as it sounded. The S&P 500 had been up around 2% at 3 PM, and then the Fed’s Vice Chair Richard Clarida through a dose of reality on the market, and well, a straight line down. 

S&P 500, spx

The ISM non-manufacturing report was better than expected at 41.8%, a pretty horrible number. The Atlanta Fed GDP is now forecasting a second-quarter drop in GDP of 17.6%. We still have ADP Private payrolls tomorrow, initial claims on Thursday, and the BLS job report on Friday! 

Perhaps Clarida gave the market a dose of what it needed, the idea that economic reopening wasn’t going to be a lightswitch flip. He noted it is going to take some time for the labor market to recover.  No kidding, it’s going to take some time to recover. It took six years for the labor market to return to 2008 levels. It took three years for the labor market to return to 2001 levels. Those declines were much smaller by comparison.  How long will this take?

payroll,

It would seem that today’s rally may only amount to a be a gap fill from last week’s sell-off. If that proves to be the case, the next move in the index should be lower back to 2,800 and perhaps 2,730. I talked about it and wrote this up in today’s midday commentary – Gap Fills Nearly Complete, Watch For Reversals.

S&P 500, spx

Disney (DIS)

Disney shares were dropping some tonight after reporting better than expected revenue, on weaker earnings. Again, this company is getting hit from nearly every angle. The stock is falling below support at $100 to $102 region, with plenty of room to continue lower to $92.85. 

disney, dis

Alibaba (BABA)

I noticed some bullish options betting today in Alibaba, and the potential for the shares to rise to around $210.  Free story – Accelerating Growth May Help Alibaba Surge After Results

alibaba, baba

Citigroup (C)

Citigroup finished the day lower by 2.6% and one the uptrend. A break below sends it to $41.20. I’m keeping a close on these banks and rates ,and you should too.

c, citigroup

Anyway, that will be all for today. Back in the AM
-Mike

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