Irrational Expectations? Go For the Jellyroll

“Sheepdog, standing in the rain

Bullfrog, doing it again.” – Hey Bulldog, The Beatles

“…S&P 500 futures and Nasdaq futures rose late Thursday after a strong day for the post-coronavirus stock market.” – Investor’s Business Daily

“It will take 10-12 years after the coronavirus pandemic for U.S. Employment to recover and see its pre-pandemic level.” – Bob Michele, JPMorgan Chief Investment Officer

“But how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade?

And how do we factor that assessment into monetary policy?

We as central bankers need not be concerned if a collapsing financial asset bubble does not threaten to impair the real economy, its production, jobs, and price stability. Indeed, the sharp stock market break of 1987 had few negative consequences for the economy.” – Alan Greenspan, December 5, 1996.

“I say to John (Lennon): ‘Return to the harmony. If you loved making the sound with him, forget personality, forget all history, go for the jelly roll.’” Art Garfunkel when asked by John Lennon if he should get back together with Paul McCartney

“Post-coronavirus stock market?” Well, I wish someone would have told me. That explains why the leaders are partying harder than at any time since 1999.

Someone’s really wrong here.

This morning we get the jobs report, which will be a portrait of devastation and given the recent reaction to headlines, it will be something else for the market to shrug off…like the Oracle of Omaha who has been seller, not buyer.

Didn’t you know—the market has discounted The Apocalypse.

The futes are celebrating hard in front of today’s bloody job’s numbers — apparently on favorable news on the China trade deal front… days after China said it “may or may not adhere to the deal.”

It’s been months since they wheeled out ‘trade deal’ for the rationale to rally.

In 1999-2000, the backdrop for the economy was genuinely strong. Yet it was as good as it got.

This is the biggest disconnect I’ve ever seen.

Main Street is pointing south. Wall Street is pointing north.

This is a Spielberg production. Wheel out the mechanical JAWS.

It’s more than full frontal FOMO. This is ORGY.

This is JAWS: Jellyroll Algomatic Weee Script.

To wit: TWLO rocketed from 122 to 176 after reporting.

COUP raced from 171 to 200 before leaving a Topping Tail on Thursday. Pin Action?

OKTA ran from 149 to 170 this week. More Pin Action?

MDB jumped from 156 to 179.

These are my Four Horsemen. They have been saddled up for bull and on the Hit & Run Hit List since April.

AVLR, ROKU, PODD, TTD and IPHI all reported earnings after the close.

All cleared buy points intraday Thursday just in front of earnings.

Of these Can’t-Wait-For-Earnings breakouts, all but AVLR fell after reporting.

AVLR fell initially and then rallied somewhat.

The action highlights how buying ahead of earnings, especially when a stock has already run hard is very risky.

That being said, IPHI reported after the bell and is up 10 Friday morning despite already having advanced nearly 100% of its March low.

Include FTNT and CHGG with the Earning Explosions.

Last night BILL reported and we’ll get to see how it fares after spiking from 27 on April 3 to 76 yesterday.

In the last three days alone ahead of earnings, BILL has jumped from 55 to 76, nearly 50%.

While TWLO was also up nearly 100% off its March low, it had not cleared its “buy point” at 129 prior to reporting.

Not all buy points are created equal.

This report seeks to determine the trend and identify the Line of Least Resistance with unique methods that find stocks before they breakout and identify stocks before continuation.

The market goes through different cycles in different environments, the last week or so we entered the Chasing Cycle.

The reactions to earnings has been breathtaking… especially if you like to make sense of things.

In addition to the aforesaid stocks being chased, other runaway names include:

QDEL

DOCU

ETSY

TEAM

FVRR

SHOP

And then there is W…up 8 fold since its March low.

Many of these runaway names are stay-at-home names, or what I call the Pesci’s.

If you’re short, you feel like you’re on the wrong side of Joe Pesci in Goodfella’s.

They are not funny like clowns if you’re short.

Yesterday the NAZ turned green for the year underpinned by the “post-coronavirus” chasing mentality.

However, in the markets, unless you have an exit strategy The Chaser gets Chastened.

It’s not just about finding stocks before they breakout, it’s about realizing gains and getting back in a name after it consolidates and pivots higher.

Stocks inhale and exhale and we want to be mirroring their behavior.

Despite the NAZ turning green on the back of the growth glamours we traffic in, the SPX resides below its 200 day moving average.

It is at an interesting spot… at the January 2018 peak, 2878, which was the highest momentum reading in history.

It has been riding a trend channel for the past month.

Yesterday the SPX was rejected from our 2901 projection yet again. This level is on our radar as it is 90 degrees down on what is called a Square of 9 Chart from last week's recovery high.

A Square of 9 Chart/Wheel measures things in their true, natural growth patterns — in a logarithmic fashion versus linear.

Clearing 2901 and sustaining above it suggests a push to a very key region — 3014.

This is the breakout level from the double tops in July and September 2019.

It also represents a Fibonacci relationship between the SPX 1982 low, the 2000 high and the 2009 low.

Importantly, the SPX saw a last ditch blow-off rally when it cleared the 3014 region into January 2020.

When the index knifed back below 3014 on February 27, it was a blaring siren.

It would not be surprising to see the 3000 region tested.

Doing so would satisfy 3 drives to the top of a trend channel.

That said, we have seen 3 gap and traps in the index the last 3 days.

Consequently, the SPX shows a Charlie’s Angels sell setup.

This is 3 Tails in close proximity.

Will this morning’s rally find sellers again or will we get a Friday weekly close over this key 2900 level?

“Childlike no one understands Jackknife in your sweaty hands.” – The Beatles