Well, if you would have told me that unemployment was at 14.7% and the NDX is up on the year in the same week, I would have told you “you are crazy”, but that is exactly what happened last Friday. Why is this happening? The market appears to think that the COVID-19 situation is temporary and with negative rates, there is no good alternative to the stock market. If the Fed is going to help keep the market afloat, get on board.
Did you know that 5 stocks make up the top 20% of the market rated S&P 500? The index is market weighted and this method divides the market cap of a company by an index’s total market capitalization to determine the weights, putting these 5 stocks in the driver seat. MSFT, AAPL, AMZN, GOOGL, FB. This concentration index does not reflect or act like a normal index. As the S&P 500 approaches 3000 it will be interesting to see what traders do at this level. There is real resistance here as the 200-day moving average, the 100-day moving average are meeting at the same point, 3000. Look at these top companies to get an idea on what will happen in the over all index.
With the options still trading with higher implied volatility, covered call selling at this level makes sense. Remember that Mike always says to buy options when volatility is low and sell options when volatility is high. Even with a dropping VIX at 27.98, this level is still high enough to consider selling covered call options on stocks you might already own or want to hedge.
Happy Monday. Good Luck out there this week.
Global Spotlight
An Israeli government forms at long last. A new Israeli government will finally convene May 13 after three elections over a politically tumultuous year.
EU guidelines for reopening. The European Union will unveil guidelines on tourism, transport and borders on May 13. The document, which is expected to include safety protocols for tourism locations, guidance on health measures on passenger transport and guidance on lifting of internal borders within the Schengen area, is an effort by the European Commission to reactivate tourism after the COVID-19 pandemic.
Brexit negotiations. The European Union and the United Kingdom will resume their free trade agreement talks on May 11, the second-to-last round of meetings before London has to decide whether to stay in the single market beyond Dec. 31.
Stratfor.com
Economic Calendar
Briefing.com has a good U.S. economic calendar for the week. Here are the main U.S. releases.
Briefing.com
Last Weeks Numbers
Review Last weeks numbers here.
Earnings
Source I/B/E/S data from Refinitiv
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Aggregate Estimates and Revisions
- 20Q1 earnings are expected to decrease 12.0% from 19Q1. Excluding the energy sector, the earnings growth estimate is -11.3%.
- Of the 430 companies in the S&P 500 that have reported earnings to date for 20Q1, 67.4% have reported earnings above analyst expectations. This compares to a long-term average of 65% and prior four quarter average of 74%.
- 20Q1 revenue is expected to increase 0.3% from 19Q1. Excluding the energy sector, the growth estimate is 1.4%.
- During the week of May 11, 20 S&P 500 companies are expected to report quarterly earnings.
