I can’t stress how important last week’s post was. Tuning out noise and focusing on price has been as crucial as ever during the market recovery. Stocks care not one whit for your terrible economic data. Just today, we learned that nonfarm payrolls fell by 20.5 million in April, ramping the unemployment rate up to 14.7%, which is a post-World War II record. The chart looks absolutely broken.

And yet, stocks are flying high. The S&P 500 is up 1.5%. The Russell 2000, which includes the smaller companies that bear the brunt of the economic damage, is up 3.3%. And don’t even get me started on the Nasdaq. Get this – it’s up 4% on the year now!

It’s painfully evident that the market is saying the worst is behind us. Economies are opening up, and the gears of commerce are turning. I’ve noticed a few milestones this week that speaks to just how far the recovery has come.

Party like it’s 1999

One of my favorite ways to compare the performance of different assets, sectors, or stocks, is to use a chart overlay. ThinkorSwim charts have this feature, and once you’re comparing three or more ticker symbols it changes the price scale to percentage change. Let’s take a look at the year-to-date (YTD) performance of QQQ vs. SPY vs. IWM.

The Nasdaq is officially back in the black for the year, up 4% for 2020. It’s utterly incredible given the economic catastrophe.

Momentum is Back

Have you noticed the increasing number of stocks skyrocketing after earnings? I have. Momentum chasers are back in full force. It’s the type of behavior you see in raging bull markets, not bears. And I think it says something about just how much improvement we’ve seen in risk-taking behavior.

Remember, one of the bearish narratives coming into earnings season was that this is when the chickens would come home to roost. This was supposed to be the catalyst for ending the market’s oversold bounce. As companies reported just how bad the backdrop was for corporate profits, stocks would slide anew as investors realized the sharp rebound was built on a house of cards.

Well, that narrative has been shot to shreds. Rather than tossing cold water on the snapback, the earnings season threw gasoline on an already burning fire.

I was going to list stocks that look good after earnings (like TWLO & PTON), but the more I go through my watchlist, the more stocks I come up with. There are a ton of great-looking charts.

Welcome Back to Earth, Mr. VIX

And then there’s volatility. Remember when the VIX surged to 85 and options were pricing in daily moves of 5%? The insanity has since disappeared, and the VIX officially broke back below 30 today, returning to its normal range. At 29, the volatility index is now pricing in daily moves of only 1.8%. As long as the uptrend in the market remains intact, the VIX will continue drifting lower. Mark 22 as the next milestone. Breaching that will bring the index full circle.

Legal Disclaimer

Tackle Trading LLC (“Tackle Trading”) is providing this website and any related materials, including newsletters, blog posts, videos, social media postings and any other communications (collectively, the “Materials”) on an “as-is” basis. This means that although Tackle Trading strives to make the information accurate, thorough and current, neither Tackle Trading nor the author(s) of the Materials or the moderators guarantee or warrant the Materials or accept liability for any damage, loss or expense arising from the use of the Materials, whether based in tort, contract, or otherwise. Tackle Trading is providing the Materials for educational purposes only. We are not providing legal, accounting, or financial advisory services, and this is not a solicitation or recommendation to buy or sell any stocks, options, or other financial instruments or investments. Examples that address specific assets, stocks, options or other financial instrument transactions are for illustrative purposes only and are not intended to represent specific trades or transactions that we have conducted. In fact, for the purpose of illustration, we may use examples that are different from or contrary to transactions we have conducted or positions we hold. Furthermore, this website and any information or training herein are not intended as a solicitation for any future relationship, business or otherwise, between the users and the moderators. No express or implied warranties are being made with respect to these services and products. By using the Materials, each user agrees to indemnify and hold Tackle Trading harmless from all losses, expenses and costs, including reasonable attorneys’ fees, arising out of or resulting from user’s use of the Materials. In no event shall Tackle Trading or the author(s) or moderators be liable for any direct, special, consequential or incidental damages arising out of or related to the Materials. If this limitation on damages is not enforceable in some states, the total amount of Tackle Trading’s liability to the user or others shall not exceed the amount paid by the user for such Materials.

All investing and trading in the securities market involves a high degree of risk. Any decisions to place trades in the financial markets, including trading in stocks, options or other financial instruments, is a personal decision that should only be made after conducting thorough independent research, including a personal risk and financial assessment, and prior consultation with the user’s investment, legal, tax and accounting advisers, to determine whether such trading or investment is appropriate for that user.