Week-In-Review: Market Just Hit A Bottom
2020 Is Another Banner Year For The Find Leading Stocks (FLS) Service. Sign up here The FLS portfolio made big money on both the long and short side! In early March, we locked in big gains in many of our long positions and moved to cash before the market crashed. Then, we tested the long side and quickly exited for mostly breakeven, or a few small single digit declines. Then, we probed the short-side and cleaned up last week as the market melted down and locked in a +15% gain on our short position on Friday. 2020 vs 1987: Last week’s massive sell-off reminds me very much of the 1987 decline and that was very steep and very quick, meaning it fell very hard and fast but quickly recovered to new highs. So far, from the Feb 19, 2020 high to March’s low on Thursday 3/12/20, the S&P 500 fell -25.93%. Friday’s big news that more testing centers will pop up all over the country is a big step in the right direction. Looking forward, if we don’t rally, and instead we fall, the next important level of support to watch is last week’s low. If that’s taken out, then I must expect more losses to follow. Until then, I expect Thursday to be a near-term low and for the market to rally from here. For now, stay safe and enjoy a very great start to 2020!
Monday-Wednesday’s Action:
Stocks plunged on Monday after oil prices tanked 30% overnight. OPEC decided not to cut production and that sent oil prices plunging over 30%. Oil prices have already plunged -50% since January! US stocks plunged 7% at the open triggering a circuit breaker which shut the market for 15 minutes. Stocks reopened at 9:49 EST and traded lower for most of the session. The major indices are now in bear market territory as they have declined 20% since the recent record high hit on February 19, 2020 – only 13 trading days ago! On Tuesday, stocks traded all over the map as the Dow opened up about 1,000 points, then fell to only being up over 100 points, then staged another late day powerful rally helping it close up over 1,100 points. That is bear market action. You don’t see that in a healthy bull market. On Wednesday, the Dow plunged 1400 points as the selling continued to hit Wall Street.
Thursday & Friday Action:
On Thursday, more circuit breakers were triggered as the market experienced its largest single day decline since 1987! The Dow plunged near 10% in one day which is a whopping sum. The Fed announced $1.5 trillion dollars in emergency aid to help easy fear of a liquidity shortage. On Friday, President Trump announced a national state of emergency to help easy restrictions and treat more patients. The market soared after news spread that testing centers will be open in Walmart, Target, CVS, and Walgreen parking lots across the country. The market was deeply oversold and sentiment was very bearish.
Market Outlook: Coronavirus Hits Wall Street
The short-term trend is down as the major indices imploded in late February after fear spread that the coronavirus will cripple the global economy and spark a world-wide recession. Global central banks stepped in with massive rate cuts to help “stimulate” markets. Let’s see if the patient (the market) continues to react well to all the easy money or if it has had “enough” and finally falls. For now, near term support is March’s low. As always, keep your losses small and never argue with the tape.
