Commentary: Paul Ebeling on Wall Street, Bulls in a Running Mood as President Trump Beats the Virus

Commentary: Paul Ebeling on Wall Street, Bulls in a Running Mood as President Trump Beats the Virus

$DIA $SPY $QQQ $RUTX $VXX

The Coronavirus Chaos Continues

  1. Stock indexes moved up continue the up trend pattern
  2. Economic data are generationally bad.
  3. Stocks continue to set up Bullish patterns.
  4. After hours reports of Gilead Sciences’s (NASDAQ:GILD) drug provide promise.
  5. Boeing (NYSE:BA) also promised to restart Seattle production.
  6. Friday gapped higher on options expiry, finishing on the highs.

Technical Analysis

S&P 500 and DJIA: Both of indexes moved laterally below the 50-Day EMA and put in a flag or handle that is similar to the late March/early February move that set up the 2nd leg higher. On Friday’s action they set up leg #3.

NASDAQ and SOX: Both gapped back over the 200-Day SMA and 50-day SMA, holding most of their gains as they closed near session highs. The NASDAQ closed at 8,650, about 570 pts and past Key resistance. Overall, the action remains positive for these 2 leading indexes, up on rising volume, Though still volatile, they feature more Northside sessions than Southside ones keeping the trends moving North.

Looking Ahead

Friday, the DJIA finished 4-wks posting a total return of about 30%, charging back from its worst Q-1 performance in history.

As the worst ‘pandemic’ in a 100 yrs continues to take its toll on the global economy. Investors are assessing what is next and are place their bets accordingly.

Perhaps what happened in the stock market 100 yrs ago offer us clues.

Bespoke Investment Group recently posted this chart of the stock market during the Spanish flu from Y’s 1918-1919, in which an estimated 50-M people died.

There were 3 different waves of the Spanish flu. The 1st and 3rd waves were relatively mild, but the 2nd 1 in the Fall of Y 1918 was devastating, with the mortality rate running as high as 24 per 1,000 people.

During that wave of the pandemic, which also came in the thick of a post-WWI recession, the DJIA peaked just as the wave was getting underway and fell for the next three months,” Bespoke said, pointing out that even with the severity of that outbreak, the DJIA never dropped more than 11%

During this coronavirus chaos, however, the S&P 500 is still down about 15% from its February all time highs, even after the amazing Bull run it has enjoyed in the past few wks.

You can see from the chart, optimism in the stock market began to take hold after the deadly 2nd Spanish flu wave, even as the 3rd wave was getting underway. From that low, the DJIA embarked on a 3-month rally of more than 25% as the world healed form the pandemic.

“Obviously, comparing 2 periods more than 100 yrs apart is hardly an apples to apples comparison,” Bespoke said. “But it’s still interesting that during what was an even deadlier pandemic in 1918, the DJIA never even approached anything close to a Bear market.”

We will be following this market closely as always, and reporting in this column as always.

Remember, it is your money so your responsibility, and above all, Always Take What the Market Gives!

Have a healthy week, Keep the Faith!

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Paul Ebeling

Paul A. Ebeling, a polymath, excels, in diverse fields of knowledge Including Pattern Recognition Analysis in Equities, Commodities and Foreign Exchange, and he it the author of "The Red Roadmaster's Technical Report on the US Major Market Indices, a highly regarded, weekly financial market commentary. He is a philosopher, issuing insights on a wide range of subjects to over a million cohorts. An international audience of opinion makers, business leaders, and global organizations recognize Ebeling as an expert.