Week-In-Review: The Bulls Are Running
Last week, the bulls kept on running, led by the Nasdaq and Nasdaq 100. On March 23, I sent out an update to FLS members saying a near-term low was put in because of the very powerful 1,2 punch from the Fed (monetary policy) and the White House/Congress (fiscal policy). The service has done extremely well in 2020 and I’m looking forward to the rest of 2020 and beyond! The market soared last week after Gilead reported effectiveness in a coronavirus drug that it has been developing. This is extremely good news and hopefully we are one step closer to going back to normal. In the short-term, the market is very “extended” and due to pullback. The one historical precedent that comes to mind is the brief 1998 bear market led by the Asian financial crisis that I have outlined before. If that happens again, the market has the chance to RIP HIGHER because of all the easy money that has been injected into the system. I’m taking this one day at a time and right now we are long and very comfortable.
Stocks were lower for most of the session on Monday but ended mixed, helped by strength in the Nasdaq Composite and Nasdaq 100. Shares of Amazon, Netflix, and Peloton were some of the stocks that broke out on Monday and they both happen to benefit from the new “stay at home” reality we find ourselves in. The fact that buyers showed up in the final hour is another subtle sign of strength. On Tuesday, the market rallied nicely as buyers showed up after my positive data was released regarding the Covid-19 crisis. Under the surface, the Nasdaq has been leading the market higher and a few of the big-cap names broke out to new highs. Stocks slid on Wednesday as the market paused to digest the recent and very strong rally.
Thursday & Friday Action:
Thursday was a choppy to mostly higher session, led, once again, by the Nasdaq and Nasdaq 100. There is a clear dichotomy forming now where the large tech stocks are racing higher while small caps are clearly lagging. After Thursday’s close, $GILD reported positive results on a vaccine which helped futures soar overnight. Before Friday’s open, China said its economy shrank by -6.8% in the first quarter as the country battled the coronavirus. China also said the number of cases jumped once again in Wuhan which is not a good sign.
Market Outlook: Flood The System With Liquidity
Global governments and global central banks stepped in with massive rate cuts and other “aid” packages to help “stimulate” both Main Street and Wall Street. So far, it is working as intended. As long as March’s lows hold, the market will likely move sideways to higher. On the other hand, if March’s lows are breached, then look out below. As always, keep your losses small and never argue with the tape.