Despite a Whole Lot of Awful Happenings, the US is Still Very Strong

Despite a Whole Lot of Awful Happenings, the US is Still Very Strong

$DIA $SPY $QQQ $RUTX $VXX

Despite millions of jobless claims, despite most of the country being sequestered at home, despite a falling in GDP, and despite the scare and fear brought on by the coronavirus the major US market stock indexes have recovered 50% of their losses in just the last 2 wks.

At the closing bell Thursday, 9 April 2020:

On the week, the S&P 500 rose 12.1%. That is biggest 1-wk gainer since Y 1974, when it rallied 14%+.

The NAS Comp had its best week since Y 2009, up 10.6%.

The DJIA rose 12%+ for 1 of its biggest weekly gainers in it history.

Thursday, the major US stock market indexes finished at: DJIA +285.80 at 23719.37, NAS Comp +62.67 at 8153.57, S&P 500 +39.84 at 2789.82

The DJIA is now just out of Bear market territory with a loss of 20.3% from its highs.

The S&P 500 has to get back to 2,792.69 to have recovered half of the entire losses and the S&P 500 is technically not in Bear market territory now that the index is down 18.9% from its peak.

The NAS Comp has to rally just 110 pts and it will have recaptured 50% of its losses and the NAS Comp also is just in a correction now with its shares down 17.5% from its February highs.

The Key issue that made things better for the stock market, and will help the broad economy on pace, is that The Trump Administration did not wait to get the economic aid/relief/stimulus package going.

President Trump and Congress came together in this time of need on a somewhat bipartisan manner.

The financial rescue tally has been identified as $2.3-T in aid from the US alone, but that is already expected to be raised under the CARES Act of 2020. Those T’s does not count all of those repo agreements from the Federal Reserve Bank of New York to stabilize the Treasury markets, fed funds rates, and even to facilitate smoother currency transactions.

The Fed responded with 2 emergency interest rate cuts took Fed Funds back to a 0.00% to 0.25% range that prevailed for years after the Great Recession. That Zero-interest rate policy comes with problems for many segments of the economy and for savers alike, but it is better than the negative interest rates that are still very much present in Europe and in Japan.

The Fed’s purchases of debt securities has also gone into overdrive, and after coming back down to $3.75-T in securities held in September of Y 2019 that is now approaching $6-T.

What is amazing about this stock market recovery is that it is looking just as unusual as the fall from grace that was seen from February through March.

The good news about the COVID-19 coronavirus news reports is that the number of deaths and the number of new cases have started to leveling off in parts of America. And America is getting ready to go back to work in the non essential industries.

As for the economy, the economic data has only just begun.

There were nearly 10-M people who turned in new weekly jobless claims in just 2 wks, and we have learned that as of last Thursday the number is 16-M.

It is becoming common to see GDP projections of GDP falling more than 20% in Q-2.

On Top of the overall demand destruction in business, the hospitality businesses around travel and leisure have been halted, and if there is a recovery some are saying it will take a long time, other are optimistic.

The mandatory shutdowns throughout much of the nation have restaurants and bars for the most part closed, hotels/motels and airlines have almost Zero demand, and cruises are totally shut down.

Shopping malls are abandoned, brick and mortar retail is shut down except for the non-essentials businesses, and there are no live sporting events and no public events of any kind to watch.

If the economic numbers looked bad for March, April’s numbers will resemble an economy where the vast majority of consumers have been disappeared.

As for the US stock market

Many technicians and strategists are point out that Bear markets and recessions require a retest of the lows. But Bear markets do not begin with recessions, so I am calling this an aberration within this longest ever Bull market where the valuations have been reset and the next leg will be very powerful, as there are many trillions of dollars on the sidelines that seek returns.

It is widely thought that the earnings season for Q-1 of Y 2020, and Q-2, will be very off. That with the exception of businesses that benefit from the stay-at-home and work-from-home economy and those that have a coronavirus fight to their model. The majority of companies have suspended or withdrawn guidance.

We will get some insight in earnings as the season kicks off Tuesday with JPM, JNJ and WFC before the open.

The Big Q: What if things were not a bad as they were made out to be?

Some market strategists, including me and Goldie have called the bottom in this market as much as 2 wks ago, and confirmed it last week.

Some others believe that a retest will happen because the the bad news has not been factored into the economy.

And they expect that the Fed’s and other efforts will be made to add further stimulus if the current stimulus fails to support the economy, the Fed said it will, the Treasury said it will, President Trump says he will and Congress is working on doing their part.

I have been in the financial markets since the early 1980’s, the markets are hard to understand, as they all have an element of price discovery speculation that wants to predict where the economy and where the world of finance will be in the coming quarters rather in the daily headline moments, sometimes and sometimes not reacting. The financial markets are alive, they breath the breaths of millions if not billions of participants, those of us who study it carefully, are very often right in how it moves and what happens. Thought it is easier to say what happened that to say what will happen.

With this health crisis aberration we may learn that the recovery patterns of recessions and bear markets do not fit here, as there has never been anything like this in play.

I do not know how this plays out for the economy because The People have been made afraid, how long will that last, and how will that condition affect the stock market’s move in the wks ahead.

What I do know is to always take what the market gives, up or down it gives a lot to those who know and understand it.

This crisis is already fading, the business planners are working with the White House to reopen the economy, the President has assembled his own task force of 100 of America’s Top business leaders, and is becoming less influenced by the medical community.

The tells

President Trump said he “liked” health expert Dr. Tony Fauci and did not intend to fire him after he said in a CNN interview that earlier mitigation efforts against the coronavirus outbreak could have saved more lives. Sounds like the Kiss of Death to me!

The People defying experts’ advice on distancing and other preventative’s to contain COVID-19 are said to be misinformed about the severity of the disease and its deadly consequences, they are declaring, “I’m entitled to do what I want” and argue it is un-American to social distance.

I am not happy with the World Health Organization.”–President Trump

It is disappointing that so many of the medical experts and pundits pontificating in the press appear tone-deaf to the very significant losses of life and blows to American families that may result from an extended economic shutdown,” said Peter Navarro, 1 of President Trump Key advisors!

Sure, the MSM is going to keep up the bad news, but more and more Americans are tuning it out or turning it off.

Americans are Strong!

Have a healthy day, stay home, Keep the Faith!

The following two tabs change content below.

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.   

Latest posts by Paul Ebeling (see all)