Market Outlook – 5/31/2020

This week ahead should have some excitement to it. The last week of the month certainly finished off strong in the final minutes, but what really changed? Most likely folks looking to pump up June numbers by planting seeds early to pull as the trouble starts…

But Stock Went Up For May?!

The S&P 500 & NASDAQ all had pretty decent months for May, but on what? Talks of more companies working on a virus vaccine, talks of more financial stimulus packages, and folks giving recent earnings calls a “mulligan” & readjusting their expectations to be modeled around next year’s projections…

So the answer there is nothing… Lots of speculation, hopes & dreams…

Markets Will Have To Brace For Global Unrest

People are losing jobs left & right around the United States, and on top of that there has been well-recorded rioting taking place all weekend/last week. The markets somewhat traded cautiously last week given the news of China & Hong Kong protests, but with the weekend’s China-India scuffle, they’re likely going to be much more reflective of the current state of affairs in the coming days-to-weeks.

Coronavirus is still a factor at play, although it seems to be less popular in the headlines than it was previously.

This Week’s Plays & What I’m Watching In The Market

While still holding long positions, I began buying call options in short-S&P 500 EFTs & VIX based products, with mid-October expirations. If the prices are right I’ll add onto them this week, as I see within the next week or two there will be some turbulence in the markets.

Looking at the charts from last week, indexes look to be stalled, not sure of which way to turn, especially looking at the candlesticks from the last few days.

While the NASDAQ’s moving averages have been greatly helped by the rush to Bio-tech & healthcare, the S&P 500’s price, 200 Day & 10 Day Moving Averages are all cozying up to one another.

S&P 500 Chart - 1 Year - 5/31/20

With the lack of strength behind recent buying & conviction, and the optimism in light of conflict, I see these options being able to help reduce to risk to my long-term holds while the market corrects its prices.

I’ve been holding more cash recently, but still maintain the view that the value-oriented names with less levels of debt and a safe dividend yield will be best suited for the start of summer, where buy-in opportunities will begin to present themselves again…

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