The Risk/Reward Balance for US Markets and Hints From Volatility

April 17, 2020

Dana Lyons kicks off today by sharing his thoughts on the balance between risk vs reward in the US markets. After the quick rebound in markets there are some internals that have Dana concerned. We also look to volatility which remains elevated.

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    Apr 17, 2020 17:49 AM

    Dana, what is time frame for this possible test of lows in S&P? I agree long term stocks must test lows but over next 2-6 months think we could head lower but don’t think we test lows in short term, Fed put approx 12 trillion into system, the loss of economic due to lockdown is estimated at 3 trillion, tuff to go against the fed.

      Apr 17, 2020 17:24 AM

      Near-term pullback may well see lows re-tested (or new lows) in lagging sectors, e.g., smaller-caps, while perhaps just a partial, but substantial, retracement in the leaders, e.g., large-caps. Envision new lows in the longer-term…I agree. Thanks – DL

    Apr 17, 2020 17:57 AM

    Rick Ackerman had a target on Apple for a top in the general market. Looks like it was hit a few days ago and Apple is falling back today. Anyone putting on any shorts of the general market?

      Apr 18, 2020 18:21 AM

      I’ve considered waiting to see a bit more optimism in the markets that things will reopen in May, and if there is a buying frenzy, then I may short that in the general markets using an inverse ETF. I’m less optimistic that we’ve seen the end of the corrective move, or that businesses will reopen as fast as people think they will.

      The millions that just lost their jobs are suffering, the businesses are suffering which Wallstreet is not factoring in with all the buying of the dip recently, and most importantly, this whole episode is fundamentally changing peoples behaviors for the long term. I’m not sure restaurants, bars, concerts, sporting events, air travel for business, cruises, etc… will ever return to the way they were at the end of 2019 or beginning of 2020. The oil markets are still in trouble, and the banks holding their debt are also in trouble. All the ingredients are there for a more prolonged recession, and this move the last few weeks is likely just a large dead cat bounce.

      Shorting the general markets the last decade has been a fool’s errand, but now it is looking substantially more attractive.

    Apr 17, 2020 17:12 PM

    Shorts. The Fed and the banks were able to manipulate the general markets up for 11 straight years against all technical and fundamental odds. What has changed? Who is in jail? Who is working on changing it? Who has been bought off? Markets are a risk until fairness has been reintroduced and regulators act.