Volatility rocks the stock market almost daily as investors scour news items to further gauge prospects and progress to the reopening of much of our economy. Any disappointing news is immediately extrapolated to negative conclusions, while positive news gives hope. The sum of all this activity is a market, after having substantially recovered lost ground, marking time in a violent trading range.
There is, however, a lot going on below the surface of the averages. Stocks, representing companies benefitting from the current environment, are mostly levitating at their optimistic valuations but not rising much further. Companies, badly hurt by the consequences of the shutdown, are gaining interest. There are bets being placed on these anticipating that the worst is behind them and recovery is or will soon begin. Therefore, the market is broadening in stocks that are participating in recovery. However, a broader market is a healthier one.
Sixty-eight percent of money managers still anticipate a return to the market lows of March. This gives the Bull and his partners increasing confidence that this will not happen since such a consensus is usually wrong. Stay well and stay steady, my friends.
The Lonely Bull