I know I sound like a broken record here but there continues to be an underlying skeptical tone to this market which is preventing it from having any kind of decline other than modest pullbacks. Just when it looks like some complacency/bear capitulation is building, all it takes is a 1-2% dip for bulls to quickly run for the exits and for the bears to get embolden again which then of course, puts a halt to the downside. Once again fund flows and AAII sentiment continue to exhibit quite high bearishness. As mentioned in previous posts, not all indicators are giving this message but there's enough holdouts to suggest that we have "a watched pot never boils"syndrome in effect. Until there is more widespread complacency I suspect the market is going to have a hard time showing major weakness.
I mentioned about a month ago just before second wave fears surfaced, that fears of a second wave could serve as a catalyst for a correction but I felt such fears were at least partially discounted already because it was something people were already worried about to some degree, Maybe I was right about that because so far second wave fears have not done much to displace the market rally that began in late March. And it could very well be that second wave fears may actually end up prolonging the $600/week in unemployment benefits which is set to expire July 31. Such an extension would no doubt be market supportive.
Look folks,I know the market has issues. I know that it's primarly being driven by the FANGMAN stocks while other sectors like banks are very badly lagging, but the bottom line here is that until enough people get back into the pool and not rush out of the pool at the first hint of trouble, the market is going to have a hard time gaining downside traction I suspect. By no means is the upside risk/reward ratio great at this point in time, but neither is the downside aside from 1-2 days hit and run type trade. The path of least resistance will be to upside.
