My bias is that the 20% rally in the S+P from October 2019 to February 2020 may have been a “blow-off top” to a 10 year bull market. (I see Tesla running from ~$250 to ~$950 as the poster child for the Irrational Exuberance of that time.) The virus set off a “tumbling dominos” decline from the February All Time Highs to the March lows...

I’ve been trading small size with tight stops. Choppy price action keeps my conviction level low. My bias is that demand destruction has been incredible...with a good chance that it gets worse before it gets better...so I think this is bear market rally...but I have to respect the fact that risk assets won’t break down.

The Nasdaq 100 surged 9% into Monday’s highs on the back of 6 consecutive up days...but then it wobbled a bit...maybe due to rising US/China tensions...maybe due to fatigue after “too far / too fast”...maybe due to the wake up calls from Druckenmiller and others...or maybe it was just the “pause that refreshes” and the BTD crowd will take this inde

Stock market indices rallied this week...lead by the Nasdaq index which is now up ~4% YTD after being down ~25% YTD at the March lows...volatility metrics keep falling and the open question is, “How will the “re-opening” play out?”

Link to Victor Adair podcast on HoweStreet.com recorded May 6, 2020

https://www.howestreet.com/2020/05/negative-interest-rates-gold-oil-victor-adair/

Overextended markets are especially vulnerable to exogenous shocks. The stock market was especially vulnerable to the virus shock in February 2020 after a 45% rally off the Christmas 2018 lows to All Time Highs...with half those gains coming in just the last 5 months as millions of new  “commission free” retail accounts piled into the market with abandon.

Massive monetary and fiscal stimulus in March and April will “counter” the deflationary surge to some extent...but it’s not a one-for-one “offset”...the deflationary impulse will be sustained...will be pervasive and enduring.

Nasdaq 100 futures went green YTD this week...up ~35% from their March 23^rd “max panic” lows...while the Russell 2000 is still down ~25% YTD even though it rallied ~30% from its March lows.

It’s all about the Fed. If you wonder why we’re seeing such a HUGE divergence the past 3 weeks between the economy and where investor psychology has taken the market...just remember...the Fed said they would do whatever it takes...did you think they were bluffing?

Has the stock market bottomed? I don’t know...but I know why you’re asking.