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The Rally Is Overdue For A Pause


  • We continue to see a huge rotation in the market into economic sensitive sectors like manufacturing, travel concerns and energy.
  • Investors are betting that huge amounts of stimulus could trigger a substantial economic rebound in the second half of 2020.
  • A strong May Jobs Report and other recent economic readings are tending to support that belief.
  • However, volatility in the market is not going away, and stock holders might be getting somewhat ahead of themselves.
  • My current read on the market and how I'm positioning my personal portfolio is outlined in the paragraphs below.
  • I do much more than just articles at The Biotech Forum: Members get access to model portfolios, regular updates, a chat room, and more. Get started today »

From one dog all the dogs bark.”― Marty Rubin

Despite the continued nationwide protests in so many major American cities, the market continued to rise last week and has continued to rise Monday. Boosted by a big rally Friday, the Dow Jones Industrial average was up almost seven percent for the week. The S&P 500 was up nearly five percent on the week and the Nasdaq rose 3.4%. Equities continue to see a massive rotation into economically-cyclical areas of the market like manufacturing, energy and travel concerns. Airlines had a huge week as travel demand is starting to come back and the industry is adding flights. Financials also had a big week as interest rates rose and concerns about consumer defaults lessened.

Investors are increasingly optimistic that the massive and historic amounts of stimulus via recent legislation, the U.S. Treasury and the Federal Reserve that will continue to hit the economy in the months ahead will trigger a strong economic rebound in the second half of the year.

That belief got a big shot of confidence Friday when the May Jobs Report came in much, much better than anyone predicted with some 2.5 million jobs being added during the month. An eight million job loss for the month was the consensus. In addition, economic activity in the San Francisco region has returned to pre COVID-19 shutdown levels. The POTUS also signed legislation that will adjust the Paycheck Protection Program late this week. This revision should be a significant benefit to small business and particularly restaurants and hotels that have been crushed by the COVID-19 pandemic.

The Nasdaq is now trading higher than it began the year despite continued uncertainty still on the economic and COVID-19 containment fronts. Here are some of my current observations on the economy, the markets and other events.

Live Chat on The Biotech Forum has been dominated by discussion of these type of buy-write opportunities over the past several months. To see what I and the other season biotech investors are targeting as trading ideas real-time, just join our community at The Biotech Forum by clicking HERE.

This article was written by

Bret Jensen profile picture
Finding tomorrow's big winners in the lucrative biotech sector

Finding tomorrow's big winners in the lucrative biotech sector, The Biotech Forum focuses on proprietary, breaking research on promising biotech and biopharma stocks with significant potential for outsized alpha. It is the fourth most subscribed to investment service offered through the Marketplace on SeekingAlpha.com. Our service offers a model-20 stock portfolio as well as the most active Live Chat on the Marketplace. This is where scores of seasoned biotech investors trade news and investment ideas back and forth throughout the trading day.

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Specializing in profiling high beta sectors, Bret Jensen founded and also manages The Biotech Forum, The Insiders Forum, and the Busted IPO Forum model portfolios. Finding “gems” in the biotech and small-cap stock sectors, these highly volatile spaces proven hugely successful have empowered Bret Jensen's own investing portfolio.

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Analyst’s Disclosure: I am/we are long CWH, ETM. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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