D&D Note (5.13.2020) ~ Disconnected Market With Highest Valuations in 18 Years Yet Falling Profits ~
The market is clearly overpriced with current valuations the highest in 18 years even though we know corporate profits still face further decline.
Billionaire investor David Tepper today called this market the second-most overvalued market in his lifetime since 1999.
FED Chairman J. Powell warns of further lasting economic harm from Covid-19 leading some to believe a new Quantitive Easing program may be in the works.
The key level to watch is 2792 on the S&P 500 as that is the 50% retracement off the lows set in March. As long as we don’t break that level we can drift sideways to up. If and when we break that level then momentum will change to downside and will look to retest lows around 2600.
Stocks today closed off the lows and did hold the technical level intraday bouncing of 2,793.15 which is a positive sign.
DOW down -2.17%
S&P 500 down -1.75% (2820.00)
NASDAQ down -1.55%
VIX up 5.78% to 34.98
Oil down -1.24% to $25.46 a barrel.
The US government is exploring ideas of supply chain domestication and in talks with Taiwan Semiconductor to possibly build a semiconductor foundry in the USA. The company TSM says until the cost gap can be narrowed it just won’t make sense. That cost gap is why these companies are located in Asia where there is cheaper labor.
LA county extends lockdown through July due to the county being the epicenter of Coronavirus in California with over 1,300 deaths.
California cases climb 2.5% to 71,141 and deaths rise 3.1%
Global cases: Over 4.3 million
Global deaths: Over 293,000
US cases: Over 1.3 million
US deaths: Over 82,000
~ Dave James / Principal Trader and Market Strategist