Commentary: Paul Ebeling on Wall Street, This Bull Market Vs Coronavirus

Commentary: Paul Ebeling on Wall Street, This Bull Market Vs Coronavirus

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Just In: Goldman Says US Stocks Have Likely Bottomed

Unprecedented policy support and a flattening viral curve have “dramatically” cut risks, the bank said early Monday in a note.

Despite the COVID-19 coronavirus, ‘new’ Bull market can run

Last week was a shortened week, here is how it played

US stocks bounced right back after the Tuesday gap and reversal.
Volume is quite low, showing that there are were not many buyers on this Northside, or sellers on the Southside

The NAS Comp was my focus, but is taking a backseat to the S&P 500, Small and Mid-caps.

There is solid breadth, a lot of stocks are rallying.

Technical Analysis

S&P 500: The benchmark index saw a solid move with a gap and rally to a higher recovery high. Then tried to push through the gap from the 2nd week in March and on to the 50-Day EMA at 2,800, it closed at 2,750. It marked a higher high, but the volume was light. If it does not pick up on the Northside, then this move will come back and test a minor support line

The NAS Comp tested the 50-Day EMA on the Tuesday gap up and then rallied back to close near that same mark. An ABCD pattern is forming as the NAS has been closing near the 61% Fibo retracement. But, as it is with any pattern, the setup is 1 thing and the move is the other. So, it could run right on up through the 50-Day EMA like a hot knife thru butter, and move to the 200-Day EMA at 8,392. 8,250 will serve as resistance along that path for the NAS and the patterns of some big names. The overall NAS pattern is not the same as those stocks. But, they have the power to move the NAS regardless.

Looking Ahead

Stock-market investors searching for a Bottom to the sharpest hibernating Bear abortion in history, perhaps it is already in.

During the SARS epidemic of Y 2003, both the Shanghai and Hong Kong indexes hit bottom shortly after the number of daily global confirmed cases crested, in this case the Chinese markets held well.

Fed, Treasury and Congress’ aid/relief/stimulus are seen as market, business and people support, and they are potent.

The Fed has taken major action to support the U.S. economy, announcing it will buy Treasury securities and agency mortgage-backed securities in “amounts needed to support smooth market functioning and effective transmission of monetary policy to broader financial conditions and the economy.”

President Trump praised his Fed Chairman Powell for his actions to combat the coronavirus.

The Fed introduced 3 new lending facilities designed to provide up to $800-B+ in financing to support the flow of credit to employers, consumers and businesses.

That action is on Top of the its reduction of interest rates to near Zero and other programs to ensure markets function correctly.

On the fiscal front, Congress has passed 2 aid/relief plans and has a 3rd and 4th package pending in the T’s.

Coming: large global stimulus; a mitigation of funding and liquidity stresses; and a deep undervaluation across major assets and position reduction. Things the Bulls like.

A broadly favorable mix of those conditions will likely be happen and turn managed money more positive.

Where to look for opportunities

As we see it here at HeffCap it is full steam ahead for the US economy, and we are overall optimistic about the prospects for equity returns in the months ahead.

We are in the later stages of the current expansion, but there looks to be enough strength in the economy to keep the current growth cycle running and the next recession at bay, for the time being.

In the maturation phase of the economic cycle, quality companies typically perform well relative to the overall market. As, they have many ways to generate returns, whether it is through margin expansion, acquisitions, buybacks or dividend growth.

So, look for companies with strong balance sheets and healthy cash flow generation, particularly in tech, industrials and consumer discretionary.

Firms tend to find earnings growth harder to achieve as the expansion wears on. These companies typically do well over a full economic cycle, expansion & recession because they have multiple ways to sustain growth and enough strength in their balance sheets to stay resilient.

Historically, quality companies have outperformed the broad US stock market over the duration of an economic cycle with less exposure to risk.

Stocks of these firms are poised to offer better opportunities for investment returns going forward.

Maybe the COVIS-19 coronavirus did not end the Bull Market

Remember, always take what the market gives, and that it is your money so your responsibility.

Have a healthy week, stay at home, 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.