Good Morning,

So, here we are – having reach the upper edge of the “range” we had suggested it appeared the markets were likely to form given the calendar, we are indeed seeing some setback. The good news is that weeks of a stabilization effort – and continued support from the Fed – even a couple days of red ink has scared the entire audience again.

This is the type of atmosphere one looks for to make (hopefully) more educated decisions on the rebalance benefits now spring-loaded into the marketplace.

Before we get to the latest graphs which we thought you may appreciate in all this noise, a couple of things are becoming more evident:

Earnings season is going along pretty well but several things are unfolding:

a) many companies are withdrawing guidance. It is out hunch that while COVID is the current excuse, we may very well be witnessing the stage being set to not have guidance anymore. This would be pretty good in a few spots – namely that it would hinder the black box trading often causing short-term gyrations based on the word “miss” in earnings releases. It will also provide the basis to begin to be a longer-term investor without these ridiculous 90-day interruptions along the way

b) Q2 discussions are all pretty much ugly – unless you are a tech company – and/or a someone providing goods in grocery stores. The latter will likely settle down as the world reopens and we get beyond this event. The former merely continues to express the powerful forces of The Barbell Economy – making tech a likely required piece of almost every portfolio going forward. This event has sped up the process of change and the 4th Wave of revolution by years as tech will take on more and more of our lives everywhere we look.

c) It is likely we are seeing a rendition forming for the basis for new planning to make more productive decisions – as weeks ago it was merely a guess in the frenzied activity of the illiquid liquidation in the waterfall panic. In essence the charts below will give you a better feel for that stabilizing effort. It seems that most discussions from management are (i) clearly erasing anything positive for 2020 – and (ii) focusing more on an average of a recovering 2021 and 2022 blend.

Obviously, some industries will recover very quickly, then others will recover a little more steadily and then finally, several which just weeks ago were fine – may take a little longer.


Note that several companies have indeed suspended dividends (not ended – suspended). Others are paying stock in lieu of the cash payment and then still others are putting on hold with make-up plans before year-end (an IRS requirement for REIT’s structures to exist.)

As previously covered, this is a period we have all never lived through so companies cannot really be blamed for those choices as cash helps to get through the window and also positions them for the M&A we are just beginning to see the first ripples of in the headlines.

Admittedly, the unique circumstances have placed what is normally a very steady flow of income into some question for the next couple of quarters.

So let’s take a look at structure. The charts below will show you two different pictures.

All are forming the trade ranges we discussed – but you are also seeing the difference between Tech (which will soon be over half of the S&P 500) and the broader regular market (The NYSE Composite which is still down 22%+).

Bothare hinting at substantial upside gains for even just getting back to old highs – which we suspect is far sooner than the now “years away” type chatter covering the airwaves. The pain trade (the surprise) remains up – even when you get the ugly days like today.

Let’s look at the 1-year snapshots first – and then the YTD trade range formation potential follows this set:

The charts above are the 1 year snapshots – in order:


S&P 500


NYSE Composite

Clearly, as you can see the common characteristic of the two best looking charts (S&P and NAS) are TECH. Indeed, we would argue – as many have – that we simply cannot use the S&P anymore as a guide – unless one owns about 52% in Tech. Otherwise, the broad market is the director for most investors today.

Here are your trade range issues more in close-up for YTD data (same order):

Once again – trade ranges – where the down days will be and feel ugly and then when fear is high, bounces to surprise will be set to occur.

Speaking of fear – here is the data keeping the theme intact:

Acrossthe board – fear is hailing down on the psyche of the investor crowd. No matter the channel – fund managers to individual investors. This is why it “feels” so foggy. The winning hand is to not look at “now” but focus instead on “what’s next” even knowing that this is a stressful process.

A steady hand at the tiller is the best way to get through a storm – even if it looks pretty piss-poor at certain periods of time. Snapshots are not the end – they are a moment along the pathway. Yes, there is no perfect time, there is no perfect day, there is no perfect setup.

It is a trudge through a battle – each step being forward, focused on the long haul underlying current which is driving the forces becoming more clear by the day. The Barbell Economy© is our total focus – as it should be yours for the long haul.

In the end – take a close look at the various channel sentiment charts above – all are on historical lows of bullishness. Confidence stinks – and unfortunately that is where one finds best chances for rebalance. We have been expecting this period to arise so in the next week or so is likely our spot to take the rebal steps touched on in recent morning notes.

Sadly, it is no fun – but this too shall pass. Patience and discipline is our direct choice at this stage as always.

Latest Items of Importance…

The vaccine front quickly recedes when red ink shows. Fear blocks out all elements of clear thinking. That is understandable but our job is to keep one focused on the pathway ahead – on the other side of the battle zone.

The quiet work being done at Pfizer, Merck, J&J and others – suggest that while it’s a tough and stressful game to play, this bat out of hell’s days are numbered.

Focus and patience my friends – focus and patience.

Most important as this rocket-ride gets fueled up over the summer:

Tech, science, speed, 5G, AI, robotics, space, human algos, life algos – all of these industries will become the “new industrials” of the years ahead.

√ Unsettling? Sure.

√ But – great for the US – as we are leaders in all of them.

√ This all sounds like a lot – but it is the basis, the tools, the driving forces of the map of the future ahead.

Be assured – like we say at the end of many of our videos – in the New Economy ahead….

Closing Items

Everything is going to change…and that is already underway

The 2020’s and 2030’s are set to be, structurally, a replay of the 1980’s and 1990’s…but on steroids.

Stay Safe and Healthy

Please remember – we are here to help as always.

Try very hard to reduce your stress – as we all work through this together.

Together is how our ancestors built this country.

Together is how we will conquer this enemy and carry us all into the New Age ahead.

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