Alon_AOB
Long

SPY-Decision Time , AlphaOverBeta Market Outlook

AMEX:SPY   SPDR S&P 500 ETF TRUST
Hello traders,
The S&P 500 lost 1.9% last week ending the week at 283, below the next resistance of 285, as more and more countries around the world reach deep into the government pockets to get the much-needed funds to get the world economy going once again.
The US, Europe and other global markets declined last week as a meltdown in oil prices increased volatility in the markets.
The May WTI oil futures contract price dropped to a negative price before expiring, and the June contract price dropped too, this is the first time in history that oil prices are negative.
The very bad move in oil prices is a result of many factors, such as selling pressure due to technicals prior to contract expiration, plus limited storage space due to a drop in demand for oil .
Stock prices improved later in the week with the government enacting another coronavirus relief package that includes additional funds for small businesses.

AlphOverBeta Next Week Forecast
The next few weeks are decision time for the market and cherry-picking for specific stocks that may be the early ones to come out of this current crisis. The market has been range trading for some time as traders as contemplating which way to go, up or down, range trading usually means very good time period to cherry-pick specific, high-quality stocks at favorable prices which is what we did last week and will continue to do this week as well.
Our models support the more optimistic side of the market with a 310 target for SPY in the near future that will be followed by a correction and then another leg up.

Are we in a stock market bubble?
Our models support a slow recovery in the market, with a sharp disconnect from main street and the economy and that's for a number of reasons :
1. Massive stimulus packages
2. Massive rate cuts, together with 1 that means a lot of cheap money that has to go somewhere
3. Many bargains at current price levels
4. Deep optimism within the trading community that usually translates into an uptrend
That's our forecast and we follow that in our portfolio BUT we also have quite large hedge positions and tight risk policies.

Is it time to buy Oil-related stocks?
An experienced trader should know to filter the noise and look at the market reality from a neutral, non-judgmental stand,
The current meltdown in oil creates many good opportunities for companies relying on oil-related products to lower costs and provide high-quality products at cheaper prices.
Oil is not only the source for transportation but also serves as the basis for other related products, such as:
soap, perfume, and other cosmetics
fertilizer, insecticides for the agriculture industry
tar, asphalt for the infrastructure domain
and last but not least Plastic, which is the base for many products from kitchenware, furniture all the way to packaging.
So when doing research for opportunities these sectors should also hold some of them.

AlphaOverBeta uptrending watchlist

Using AOB Dashboard to spot trending opportunities in the market.
  • APA
  • MUR
  • FLR
  • XOP
  • SIRI
  • EBAY
Check out the list on our Dashboard

Out top-ranking stock for the week is Apache Corporation ( APA )
Apache Corporation is an independent energy company, explores for, develops, and produces natural gas , crude oil , and natural gas liquids (NGLs). The company has operations in onshore assets located in the Permian and Midcontinent/Gulf Coast onshore regions; and offshore assets situated in the Gulf of Mexico region.

AlphOverBeta Sectors rank
As we stated last week, the biopharmaceutical and healthcare sectors are picking up momentum, we estimate that this trend is a long term one and is here to stay, the next 6-9 months are going to be all about protecting ourselves from the current and future pandemic, so these sectors make complete sense to investors,
Our long equity portfolio is long on the sector and specific picks in that sector

Trade Smartly,
Alon, AlphaOverBeta

Comments

good analysis , however I disagree we will see 310 this year , 300 maybe, am expecting the rally to stall between 290 and 300 followed by sharp sell off, it some point common sense has to prevail, we are only buying based on unreasonable optimism to recovery, at some point those hedge funds with financial resources to move market will say enough is enough and they will sell this bear market rally, it may happen as soon as next week.
Reply
Alon_AOB ARCHIDUKE
@ARCHIDUKE, you should seat in our morning meetings! That's exactly the other side of our discussion, some analysts in our firm think exactly like you, thanks for commenting, I think there is a lot of logic in what you say, we still maintain the more optimistic way but with smaller positions, hedged, and tighter risk management
Reply
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