On Thursday the
SPX was spurred through the 50% retracement of the decline from February to close just below it after the virus-curve-flattening rally and on the back of another 2.3 Trillion in Federal Reserve aid. The 20 day moving average is turned up while the 50 day is still pointed down and the NYMO and other oscillators are hyperextended as we get further away from the 5 day moving average. The ES futures are a bit tamer to trade lately and there was actually a decently defined point of control on Thursday where the most time and volume coincided with the closing print of ES 2787. That said, a VIX over 40 keeps these huge intraday ranges possible. If SPX maintains the halfback retrace and approaches the partially filled down-gap at 2865 through 2890 – and the 50 day moving average - we'd have to wonder how the next important retracement level around 2935 could be breached given the undefined macro backdrop. It is pretty tough resistance. The largest grouping of tech stocks, the NDX, has flirted with and managed to move over its 200 day moving average and the small caps are moving harder than the rest even though they remain in a deep trough. This technical action is viewed as bullish in the short term and short termers won't be surprised if the market behaves in what the bears would call a perverse manner until we see economic or internal data points that put larger buyers off.
Hi
@DeltaVee and thanks for the mention. I hope your holiday weekend is going well. I don’t know if I'm tired out or worried about ending up saying nothing at all as this market has me perplexed.
@Sector I knew someone would know that place. That must have been good fun you had. Agreed on the short covering by the way. I wonder if
@Bugsam has been there too.
As of Thursday, major support (unhindered by headlines or broad realizations) for Monday's cash session is 2700 and 2650, and price over 2700 puts a point of contention at 2720. The bulls would like price to stay above initial support and 2760. For mid-week, 2850 is resistance and for the rest of the week, SPX 2700 remains a point of contention and high resistance is 2900. Even though this is broad and obvious, take it all with a big grain of salt as it can change rapidly on headlines or if sellers come in immediately in the first part of the week. If sellers did come in then SPX 2500 is a big area of weekly hedging resistance as of Thursday's close.
Market Internals: On Monday, Wednesday and Thursday, breadth was more than decent with NYSE A-D lines flat and high and NYSE up volume outpacing down volume at over +10:1 for much of those sessions. Traders will continue to observe intraday and trending breadth and TICK for signs of real buying interest.
The bond market, torn between massive Fed intervention and uncertainty about equites is in kind of a limbo at the moment and Thursday there was buying with the commensurate decline in yields. At present, the 2-year note is yielding 0.22% and the 10-year note yielding 0.729%. The big 30-year bond is now yielding 1.350%.
Check out the high yield bond space from Thursday. This massive gap up in
JNK and HYG came with the Fed's action which included a consideration to buy high yield debt ETFs. This move had been telegraphed for a few weeks. If you superimpose either ETF or oil on the SPX you'll see why this could be helpful to equities…but then again, so is keeping interest rates so low. What's next? The randomness of reality and the lagging indicators we use to track things make trading hard enough already. If you add pumping by politicians - e.g. last week's phone call to Putin which may or may not have involved talk of oil - to the Fed put, it gives us headaches.
Speaking of dishonesty, it is widely reported that Western intelligence presented the US administration and others with risk assessments in early January and that memos detailing the potential severity of the problem were circulated within the White House in late January. Politicians downplayed the threat in the months that followed. I don’t see how they can get away with it during the election. If such audacious political risk taking becomes clearly evident in the minds of swing voters, then we might expect the administration to react in increasingly volatile ways.
I don't know if you've seen these coronavirus press briefings we have each day but many will turn the volume down for most of it. Closed captioning is easier to take and the gaps in translation are hilarious. The president wants to be reelected and he keeps saying that staying home is as potentially as bad as the economic effects of social isolation. On Thursday he actually said people can die from being home, too. I suppose he is talking about the deleterious effects of joblessness -- the intended subtext being that he has the power to quantify how many will die as a result of social distancing vs the virus itself.
Here is an example of this kind of rationale in some FP commentary about the situation in the developing world. Fair enough, but I will consider the source because words and action matters; the president has also compared the virus to common influenza and car accidents. We get it…we all want to get back to work. But we better check ourselves when it comes to permitting this kind of barely contained (curtailed by democratic institutions and shame) utilitarianism in our leaders. Their thoughts are not the thoughts of a mother for her child or even a carrier strike group commander for his sailors. Their moral calculus is not even close to the thoughts of independent infectious disease specialists. These politicians embody a will to power, and, in the US case, I would argue that we are dealing with the addition of sociopathic narcissism at its most self-evident.
There is widespread suspicion among his base that the president's political enemies are overthinking and exaggerating the danger to life in an effort to thwart his chances this fall. If anyone is inhuman enough to wallow in schadenfreude, though, it might as well be those who think this virus is retributive karma for our violations against nature. It is true the skies are clearer, and seismologists are loving the silence. Any nature lover is painfully aware of our sins against the planet, but I don't think grandma should have to pay the ultimate price for the dreams of some wild-eyed tree-huggers who are pissed about missing Burning Man this year. Some of these same individuals are the ones who sneer when they see a mature age person in a mask at the grocery store. I
can't even.
The self-preservation calculus of some world leaders involves this: how many folks should we let die to preserve our economies. More specifically, how can we as leaders convince enough people to get back to work long enough for the commoners to emotionally accept what we in our wisdom have accepted as a reasonable human toll. "The metrics [are] right here" says Trump pointing to his head, "that's my metrics". But the president's metrics are like his words; he has lots of good ones, but they don't necessarily have any real meaning to anyone but him. There is one clear truth here and that is that no epidemiologists have a solid idea of how many cases there are in the US, much less elsewhere. It is thought that as many as 25 to 50% of carriers are asymptomatic. You do the math. The divergence between what we accept in our personal lives and what some leaders will accept in their sphere of rule is probably very wide. "I'm going to have to make a decision…and I hope it’s the right decision" says Trump. He says it’s the most important decision he will have to make. But in the end, people are going to go back to work with trepidation and no one can force states to lift their social distancing orders. “We could be pouring gas on the fire, even inadvertently… “it’s not Job No. 1., because right now, the house is on fire and Job No. 1 is to put the fire out.” - the Governor of New Jersey echoes what other state officials around the country are saying.
In my opinion, Drs. Fauci and Birx have lost a measure of reliability in the past week by trying to placate the president. They have made a calculation of their own: it is better to ride the fine line between hope and despair and stay within the president's sphere than alienate him altogether by contradicting his words…thereby losing any ability to influence him. At first glance this seems an admirable tack but on the other hand it is yet another form of pragmatism that could have deadly results. Perhaps they have a backup measure in the works. Mealy-mouthed mixed messaging has one clear benefit, though -- it's great for the stock market.
At week's end, NYT was
reporting that a new government model supposes that if current social distancing is removed in 30 days, we would get new waves of infections. This seems like common sense to me if you consider what it took to stem the rise in NYC and the recent
research by the National Academies of Sciences, Engineering and Medicine that looks at the effects of heat and humidity on the virus. The current curve flattening is based on major European cities and NYC. What about the rest of the US? There are states that have not instituted strong measures against social contact. Hope everyone is staying safe.
