Waiting For Intervention

So, was that capitulation?

Market breadth was horrendous, as only 14 stocks hit new highs on the New York Stock Exchange, while 1,615 cratered to new lows, and volume was 7.12 billion for declining issues.

Market Breadth

NYSE

NASDAQ

Advancing

76

172

Declining

2,968

3,179

52 Week High

14

53

52 Week Low

1,615

1,397

Advancing

243.44M

462.94M

Declining

7.12B

3.58B

I’m not sure if we have to retest yesterday’s low, but the market held at a key support point, which I mentioned on the afternoon note.

While picking the bottom has been a long-time investing parlor game, the idea on when to actually get aggressive comes with taking out important resistance levels.

For the S&P 500, these are pivotal numbers that could trigger buying:

  • 2,836
  • 2,972

S&P Sector View

Yesterday

Market Cap

1-Year % Change

Communication Services

5 Industries

-4.71%

$4.51T

+8.03%

Consumer Discretionary

11 Industries

-5.14%

$5.26T

+3.77%

Consumer Staples

6 Industries

-3.41%

$3.80T

+13.37%

Energy

2 Industries

-18.18%

$2.34T

-34.72%

Financials

7 Industries

-9.81%

$6.29T

-3.37%

Health Care

6 Industries

-4.61%

$5.85T

+6.65%

Industrials

14 Industries

-8.01%

$3.88T

-4.00%

Information Technology

6 Industries

-5.32%

$8.72T

+25.58%

Materials

5 Industries

-7.86%

$1.68T

-2.41%

Real Estate

2 Industries

-5.71%

$1.36T

+10.47%

Utilities

5 Industries

-4.83%

$1.56T

+17.55%

The market rout had a feeling of classic capitulation, even though it was still orderly.  I’m in the camp that this is a severe overreaction, which ironically only helps to make a worst-case scenario a reality.  Speaking of reality, the more the public knows about the impact of coronavirus around the world, and gets more information here, including greater testing and information flow, the markets should settle.  

Overseas

Italy is on lockdown, and I think it’s a great move. Meanwhile, we know the average age of deaths is 81 years old with underlying medical issues, and 72% were men.  China President Xi is visiting Wuhan, as cases have plummeted, and there are increasing signs the economy is coming back.  Other nations are taking decisive action, from travel restrictions to closing schools. 

United States

Here at home, President Trump will be meeting with the House and Senate to get an array of stimulus packages, including a payroll tax cut,  paid sick leave and making sure hourly workers that are forced to miss work get relief. 

As for the stock market, there is a nice bounce in the offering (although, the financial media is trying hard to talk it down, calling it a dead cat bounce, and no big deal considering yesterday). Pre-open trading held up after the S&P hit 5% upside limit.  There is a sense that global central banks will add more stimulus and other nations more fiscal assistance. 

Portfolio Approachimage

Today’s Session

In addition to the equities rebounding after yesterday’s drubbing, oil is up almost 8%, and energy names are pointing to a big open today with names like Occidental Petroleum (OXY) indicating up 28%, Apache (APA) +24%, EOG Resources (EOG) +10% to name a few.  Airlines and travel related stocks are also up today, including the severely beaten down cruise industry.  

Speaking of airlines, several announced they are reducing their flights including, American Airlines (AAL),  Delta (DAL), which is also suspending it stock buy backs and reducing capex by $500k, and Southwest, whose CEO, Gary Kelly, will take a 10% pay cut.  Despite this, the stocks in this sector are up 4-7% this morning.  

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