The Overnight Report: FOMO

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By Greg Peel

Shuffling Around

And on the third day, the tenor of ASX trading changed somewhat. The ASX200 was off to a flying start once more on a 500 point rally in the Dow, until someone pointed out that the Dow had been up 1000 points but the relief package had not yet been passed through Congress. So an opening gain of 113 points became 13 points by midday.

Then lo and behold, the Senate passed the bill. It still has to be passed in the House, but resistance is not anticipated. US futures moved up and the ASX200 was back on track to be up 174 at 3pm, before slipping away to the close. The Future Fund might have locked in some three-day profits.

The turnaround rallies of Tuesday and Wednesday exhibited a clear trend of buying everything, but buying a lot more cyclical than defensives, with cyclicals having been beaten down a lot further in the rout. Yesterday was a different picture, and a bit of a mixed bag.

IT is cyclical, and it rose 7.4%, but mostly because the RBA suspended its investigation of credit providers. Thus Afterpay ((APT)) rose 29% and EML Payments ((EML)) rose 33%, with FlexiGroup ((FXL)) chiming in with 33%.

Healthcare is defensive but came in second (+6.5%), having been the only sector to close in the red on Wednesday. Cochlear ((COH)) bounced back 8.4% after successfully putting away its capital raising, while Ramsay Health Care ((RHC)) jumped 15.3% after offering its hospitals up for virus treatment.

Defensives utilities (+3.4%) and industrials (+3.6%) caught up some ground, with Transurban ((TCL)) rising 2.6% despite few cars on the road, and Sydney Airport ((SYD)) rose 10.5% despite being empty.

Energy rose 4.4% but that will possibly change today. Materials only rose 0.1% as safe haven gold miners were sold off to fund bargain hunting elsewhere.

Consumer discretionary rose 4.4% as Solly Lew gave his landlords the finger. And because some of the more beaten down names were picked up in the rush, such as Bapcor ((BAP)), which issued a positive trading update, as well as G8 Education ((GEM)) and Star Entertainment ((SGR)), all rising just over 20%.

Staples only rose 0.4%, having been the stalwart through the crisis. And one day the hoarders will wonder what on earth they're going to do with all that toilet paper.

Financials rose only 0.4% having led the charge from the bottom.

Aside from gold miners, the individual losers list included Solly Lew's landlords UR-Westfield ((URW)), down -8.9%, and Vicinity Centres ((VCX)), down -4.9%, along with insurance broker Steadfast Group ((SDF)), down -4.6%. Just think of death & disability insurance, employment insurance, business insurance too late if you haven't got it.

The Dow is up another 1300 points overnight and our futures up another 184 this morning. While the virus caught everyone by surprise, and the speed of correction has been unprecedented, this crash is still sticking to the script. The ASX200 was well and truly in "oversold" territory after last week's capitulation, and now, as the bargain hunters move in, will quickly push back to simply "sold".

It is from that point economic data and case-counts will start to matter. This is now a classic FOMO rally driven by those terrified they will miss the bottom and thus the greatest investment opportunity of a lifetime. History calls this stage the "Suckers' Rally".

Buddy can you spare a dime?

In recent months US new jobless claims had been running at an historical low average of around 200,000 per week. The week before last saw a slight tick up to 282,000. Last week new claims rose to 3.28 million.

Such a number has never been seen before (series began in 1967). Not in the GFC, Tech Wreck, nineties recession or ever in the period. Fearing the worst economists had forecast 1.5 million. Now they fear the number realistically should be bigger still, given the strain on processing capacity (think queues outside Centrelink).

Thank God the Senate passed the US$2trn relief package, and the Fed printing press continues to run 24/7. This was worth 1300 Dow points, 500 of which came in the last half hour.

The big question remains as to just how quickly this money can actually get to those who need it, what the definitions of those who qualify are, how the system can be ripped off, and whether companies will go bankrupt waiting for their cheque.

A case in point: if ever an industry needed rescuing, it's cruise lines. Yet none of the biggies are registered in the US. But they do employ 420,000 Americans. What to do?

As for three days of surges on Wall Street, the same FOMO and momo (momentum trading) scenario applies. Wall Street rallied hard on anticipation of the relief package, and has run hard again on its passage. Last night CNBC trucked out a bunch of highly respected billionaire investors who to a man said they expect the S&P500 to be higher by year's end, they're nibbling now, but they expect the correction will continue to play out for months yet.

When the market moves from "oversold" to just "sold", short term first movers will start to take profits.

And the jobless claims are just the start of the OMG data releases.

Commodities

Back in the Old Days, when Saudi Arabia and Russia started an oil war (earlier this month), Trump pledged to prop up the US oil industry by buying for the government's Strategic Reserve. That pledge did not make it into the US$2trn package.

Hence oil prices have fallen again.

Between the government's US$2trn, called "just the beginning", and the Fed's US$ infinity efforts, the US dollar index tanked last night, down -1.5%. This helped gold, but is still having little effect on metal prices.

The Aussie countered with a 1.8% gain to US$0.6068, now up about a full five cents from its low.

Today

The SPI Overnight closed up 184 points or 3.6%.

The S&P/ASX quarterly index rebalance, which otherwise would have taken effect today, was postponed.

The next potential OMG data release is tonight, with US fortnightly consumer sentiment.

The Australian share market over the past thirty days

For more detail go to FNArena's Australian Broker CallReport, which is updated each morning, Mon-Fri.

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