June 04, 2020

The HCM BuyLine® is strong and is now moving into its 7th week since turning positive. What a great non-emotional indicator that brought our investors back in at a very rapid pace. Math sees things we as humans do not. That is why we trade math, not emotions.

HCM BuyLine

The market has broken above a key resistance point on a Fibonacci chart, clearing the way for a possible new high on the S&P 500. If you will recall, I predicted the odds were high that we could see an all-time new high this year, and it looks like that is happening even faster than I thought. Given the mountain of cash on the sidelines ($5T money market + $2T private equity + $1T corporate), there is a lot of cash that could be buying equities if the economic recovery gains traction. 


Money Market Fund Assets
The protests and riots have all but nullified the stay at home order. But what we do not know is what will happen in the next two weeks.  And therefore, the path of COVID-19 in the US is dependent on the outcome from these protests. No doubt, Americans gathering in density is similar to the Champions League events in Northern Italy that resulted in that country's massive outbreak.  We now have transmission risk in high gear in the U.S. in 75 cities. This is a fact. The outcome could be one of several: cases in the U.S. explode over the next two weeks; U.S. cases remain flat/steady next two weeks, more of the same trend as today; or the third outcome which is what we are all hoping for, U.S. cases collapse in the next two weeks. Lets all cross our fingers for the last scenario. It is very likely that Americans will resist a future effort to shelter-at-home, and we do not see this happening. The biggest winners if there is no "second wave" in two weeks: theme parks, cruise lines, airlines, casinos, outdoor events, sports and stadiums, concerts, bars and nightclubs, theaters, etc.

Protests in US

The first protests started 7 days ago, and according to multiple studies, 92% of those exposed to COVID-19 are symptomatic by day 14 and 50% by Day 7. Day 14 will be June 11th.  Therefore, if no massive second wave starts by June 11th, we have a definitive break in the transmissibility of COVID-19. So, the best-case scenario is no surges in the next 9 days.

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