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Circuit breaker limits today

Level 1 – S&P must fall 7% – in192.50 pts

Level 2 – S&P must fall 13% – 357.50 pts

Level 3 – S&P must fall 20% – 549.94 pts.

So stocks surged out of the gate again yesterday morning – building on the gains that we have seen since Monday. Investors/traders and the algos continue to believe that the worst of the virus is now and that it can only get better from here… mmmmmm. I’m not sure I am in that camp just yet. I mean we had 1,939 deaths in a 24-hour period. Monday 8 pm – Tues 8 pm – marking the deadliest day yet, taking the US total to more than 13,000 people and it hasn’t even peaked yet in NY, NJ, CT MA, FL, MD, GA – (East Coast). Never mind the next surge through the heartland of the country before it gets to the West Coast sometime in the next two weeks. Now unless all of the social distancing has stopped it in its tracks, (and it has helped for sure) I am not convinced yet that we’ve seen the worst of it – I mean just look at what happened in Europe – Italy shut down almost immediately yet – it spread like wildfire –into Spain (which has seen more deaths than Italy) and onto France, Germany and beyond… I understand that we WANT this to be over and I understand that the administration WANTS it to be over – and if they say it enough times it must be true! So let’s see. We still haven’t even see the full economic impact that the virus and the forced shutdown has really created… (but that’s another story).

In addition to the ongoing virus talk – yesterday at about 11 – news hit the tape that Bernie was dropping out of the Presidential race – blaming the virus for this decision as it has prevented him from holding his “signature” rallies that whip up the left. In another blow to his campaign – Wisconsin (a state he thought he could win), did not delay their primary (which was on Tuesday) and while we do not know the official results yet – exit polling is suggesting that he is likely to suffer another humiliating loss. He made the announcement during a live stream address saying:

“The path toward victory is virtually impossible and that if I had a feasible path to the nomination, I would certainly continue the campaign, but it’s just not there.”

And the market surged again. The headline hit and the algos took the Dow up another 200 pts in short order – (human beings couldn’t have acted that fast at all). It’s all about the algos and how they read and scrape the headlines across hundreds of sources in seconds and when the headlines are positive – BOOOOMMM! Up we go! (Conversely – when the algos perceive the news to be “negative” we get the same but opposite reaction and BOOOOMMMM – down we go.) So, yesterday’s news was “perceived” by the algo’s as positive. His attempt to pull the country left has failed, suggesting that the country is not ready for his (or the left’s) “Socialist policies,” leaving the more center candidate. VP Joey Biden as the presumptive candidate to challenge Donny in November. This now gives Joey more time to unite the Democrats under one banner in their efforts to oust the President.

Industries that would have suffered under a Sanders Presidency surged higher! Financials – XLF +4.37%, Healthcare – XLV +4.2%, Tech – XLK +6.67% leading the pack as investors celebrated. Projections by some of the largest names in the financial services industry that had suggested that the market and economy would tank under a Sanders presidency seemed vindicated – (Blankfein, Dimon, Gundlach, Langone and Druckenmiller to name just a few). By the end of the day – The Dow had gained 780 pts or 3.4%, the S&P was up 90 pts or 3.4%, the Nasdaq surged by 203 pts or 2.58% and he Russell added 52 pts or 4.6%.

And Oil? Oh right – let’s not forget the role that oil is playing right now. Yesterday saw it surge again – closing up 3.3% – after the beating it took on Tuesday when it closed down 6.7%. And this morning WTI (West Texas Intermediate) is up another 6% rising $1.42/barrel to $26.50/barrel. Remember that today – OPEC – led by the Saudi’s and the other members along with the Russians are set to “ZOOM” (Zooming is now a new verb – like “Google” and it speaks to the way business gets down in a “social distancing world”). The ZOOM meeting is set to go off at 10 am EST, so expect to hear bits and pieces as the morning turns to afternoon. The pressure is high on the members to come to an agreement to put a floor under oil prices and the market is expecting that an agreement will be reached. If so – I suspect oil will surge up and through $30/barrel – taking the energy names with it. If not, then look for oil to fall – along with the energy names and test $20/barrel – the lows back on March 30/31st. Oh it is a tangled web we weave…

Overnight, Asian markets moved higher on news that China has re-opened Wuhan, virus cases in Europe are slowing, virus cases in the US are slowing (doubtful), Sanders drops out leaving Joey securely in the spot to challenge Trump. Australia surging by 3.46% after they announced a huge stimulus plan. The BoK (Bank of Korea) left interest rates unchanged at 0.75% (no surprise). Asian investors await today’s US economic numbers. Japan ends flat, Hong Kong +1.38% and China +0.33%.

In Europe – markets are mixed, not following in Asia’s footsteps. Continued concern that the virus is not slowing at the top of the list. In addition – Europeans await today’s US economic data, which is not going to be pretty. In the UK – the BoE (Bank of England) announced that they would finance UK government borrowing IF the money can’t be raised in the debt markets. UBS and Credit Suisse postpone their dividend payouts until later this year – bowing to pressure from regulators. In other good news – UK PM BoJo is doing better and is alive and well – still in the hospital, but awake and alert.

FTSE +0.25%, CAC 40 – 0.74%, DAX +0.42%, EUROSTOXX -0.38%, SPAIN -0.30% and ITALY +0.98%.  

US futures were up in early trading but have since turned lower. As the sun gets ready to rise – Dow futures are down 153 pts, S&Ps off by 20 pts, Nasdaq lower by 82 pts and the Russell is giving up 6 pts.  Now – none of this is a reason to pull your hair out, but it continues to tell the story of nervousness. Big up days followed by big down days appear to be the norm for now and that makes sense. The market needs to find stability and with more negative macro data (while expected can still be shocking), very weak earnings, continued concern over the extent of the virus and the impact to the US economy, which no one can detail with any certainty. Expect the continued volatility in the days and weeks ahead.

Earnings which start next week had been projected to grow at about 5%. That has dramatically changed and now the trajectory suggests that they will fall by 7.5% and that is just a “best guess.” When the beauty pageant starts – is when we will get more clarity. Again – you don’t have to blow up your portfolio at all, talk to your advisor, sort through the holdings – rebalance and add names that are expected to outperform as we come through this. In all of this angst – there is opportunity.

Economic data today includes Initial Jobless Claims – exp of 5.5 million people have entered the rolls. If so, this would be down from last week’s 6.6 million people. (I guess that is a positive), Continuing Claims are expected to skyrocket, coming in at 8.2 million people up from 3 million last week – and that makes sense – so this should not be a driver. PPI (Producer Price Index) is exp to be -0.4 and Ex food and Energy is expected to flat.

The S&P closed at 2749! It is now up 25% off the March 23rd lows – putting us into a “bull market!” It feels a bit toppy right here, and it should not surprise anyone if we back off a bit, technicians might say to 2649 – which is 4% lower. While other technicians might say we have room to run – citing 2921 as the level of resistance (50 DMA). My sense is that the path of least resistance is lower – but today is the last trading day of the week – markets are closed tomorrow for Good Friday. This day historically tends to be an up day (for whatever reason) – not sure that will hold true for today. With the long weekend coming – so much more can happen – so I suspect that the market will churn in here today with a downside bias as the trader types take money off the table ahead of the weekend. We appear to be in the 2650/2920 range for now. That may change when earnings start next week – stay tuned.

Take good care – Happy Passover and Happy Easter – Stay safe


Roasted Leg of Lamb

In my house we make Lamb for Easter – besides the Lasagna, Italian Wedding Soup and all the veggies… followed by the deserts and Limoncello.

So try this leg of lamb, you need to make the dressing for the lamb and for this you need

Olive oil, Fresh lemon juice, 6 cloves garlic, Fresh rosemary, kosher salt and black pepper. Now make the marinade. Add the ingredients to a blender or food processor and process until smooth. The marinade should be thick in consistency so it doesn’t run off the meat while cooking and forms a bit of a crust.

Preheat the oven to 425 degrees.

Next peel and dress the potatoes with olive oil, s&p, fresh lemon juice, garlic powder and oregano. Toss and mix well. Put the potatoes on the bottom of the roasting pan. Now place the lamb on top and put in the oven covered and roast for 25 mins. Now turn the oven down to 350 degrees and continue to cook – uncovered… (rule of thumb – 20 mins per pound is about right).

(Now while this is cooking – you can serve the soup, then the lasagna leaving room for the lamb)

Make sure to baste the potatoes and the roast while cooking. When done, remove, cover and let rest for 15 mins. You can now broil the potatoes so that they become almost golden brown.

Slice the lamb, arranging nicely on the platter, circle the meat with the roasted potatoes. Make sure to serve with a large mixed salad and enjoy.

Buon Appetito.