Well, team, we’re entering the 3rd quarter with the least amount of short-covering risk (less support for rallies) since the bear market bottom (in the S&P 500):
And, conversely, the most net long exposure for the Nasdaq this year (that’s risky right here):
Pretty good bounce in net long exposure for smallcaps as well:
Vix speculators are feeling more gutsy (betting the vix falls further/stocks melt higher) than they’ve been since March:
Here are two we, as you know, completely agree with… note how fresh the change in sentiment: Copper and the dollar:
Now this one guys/gals is the most bullish chart of all for stocks for the remainder of 2020. And it’s really incredible. It’s the TGA (treasury general account). Think of it as the treasury’s piggy bank. The amount you see there amounts to well over a trillion dollars (1.6 in total) of new borrowing (a trillion being the normal entire-year’s budget deficit) that essentially wasn’t needed to fund the government. They literally issued this debt just to hold onto the cash. So, why? This is an historic first! Well, as you know, or should know, I struggle with conspiracy theories, but this one is so blatant I can’t help it. This is Mnuchin essentially assuring that no matter what, whether Congress passes more stimulus, and/or regardless of what the Fed does, he has the firepower to juice the markets during the critical months leading into you-know-what in November.
Yes, this is huge support for stocks, you can bet on it. However, betting big on stocks given everything else going on (and there’s lots) is — despite what I just wrote — hugely risky. Stocks can still fall in the face of rampant stimulus, I’ve seen it… If not over the next few months, dear Lord, just wait till we reach the point when they’re forced to let up, even modestly, on the life support for stocks:
Thanks for reading!