Commentary: Paul Ebeling on Wall Street, Taking the Long Term Outlook

Commentary: Paul Ebeling on Wall Street, Taking the Long Term Outlook

$DIA $SPY $QQQ $UTX $VXX

Last week’s action

  1. President Trump is now Laser focused on Opening Up America
  2. The S&P 500 hit the 78% Fibo retracement of the selloff.
  3. After a good 3rd leg, the market is ready for a test, how deep a test is the Big Q.
  4. We are watching the leaders to see if they can hold their near term support.

The Technicals

S&P 500: After topping 2,900 last Wednesday, the large-caps sold on volume. As the index held at just over 2,900, this was not much of a loss. Perhaps the higher volume was just caused by end-of-the-month position rolling. The S&P 500 did touch the 78% Fibo retracement of the selloff, an important resistance mark.

NASDAQ: A few big tech names kept losses at the flat line. That works because the NAS Comp has been driven by the big names. The nice rally and a good boost on the initial earnings means that the NAS is now due for a pullback.

Looking at the long term

Every bit of communication from a company during this C-19 chaos will be scrutinized by all stakeholders.

Short-term investors may press the company for clues about trading opportunities.

Long-term investors are looking for evidence of resilience: How will the company withstand the crisis, and how strong will it be in the long term, considering its competitive position, growth potential, and returns on capital?

The investors tell us they need a clear understanding of companies’ liquidity and cash position.

If companies are stressed, investors want to hear more frequently from them about how they are managing liquidity in the short term: a detailed view of these companies’ sources and uses of cash; preferably on a month-by-month basis would be helpful.

For those companies that are strong going concerns, investors want to understand how employees are doing and the steps companies are taking to ensure employees’ safety and well-being.

Ferrari is an example. Ferrari starts the “Installation Lap” phase, courses on new safety regulations

Some visibility into how these companies adjust the size of their workforces under various scenarios is helpful, as can an overview of the Key economic drivers of their businesses.

Long-term investors say they are looking for honesty and transparency about the C-19 coronavirus’ effects on companies under various if–then scenarios.

Such transparency is especially important when different parts of the business are being affected unevenly.

Investors understand that companies cannot predict the future. But they do expect that companies will share enough information about the pandemic’s effect on their businesses that investors can make their own assessments of how the companies will fare through the chaos and beyond.

On Quarterly calls and in other communications, companies should share the most current information, not just numbers from the prior Quarter. Historical information is less important in times like we are in now.

And, the investors recognize the folly of Quarterly guidance in good times, let alone during a time of crisis. Most of them say they prefer companies to provide guidance based on long-term Key performance indicators of value rather than short-term EPS. The C-19 chaos presents a good opportunity for companies to stop providing investors with short-term guidance now and after the this medical emergy fades.

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.