Weekly Perspectives: When Will Things Return to Normal?

Weekly Market Outlook For May 4-8 – Should I Sell In May and Go Away?
May 2, 2020
Weekly Market Outlook For May 11 – 15 – The Cognitive Dissonance Between The Economy + Stock Market
May 9, 2020
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Here is your weekly newsletter — perspectives on trading and financial markets.

Click here for last week’s edition.

 

Results of Last Week’s Poll – Are You Trading More?

Last week I was curious and posted a poll to find out how many of you are trading more since the enactment of social distancing.

A small number of you responded (slightly under 50) and interestingly the majority of respondents (~69%) answered that they are trading the same or even less.

That was a bit surprising as I have found in the past several weeks that I have tended to trade more which is in line with how ~23% of respondents answered.

I don’t think we can reach any grand conclusions with such a small poll but it’s an interesting data point nonetheless.  

Thanks to all who participated in the poll!

Should I Sell In May and Go Away? 

Last week’s consolidation was broken to the upside this week as the SPY, QQQ, and IWM all broke above their prior inside week’s high as buyers stepped in to push the markets to multi-week highs.

At one point during the week, the QQQ’s were less than 8% away from the previous all-time highs but by mid-week, the buying pressure subsided when the SPY tagged both its 50 period weekly EMA and 200 day EMA and we saw profit-taking and selling to close out the week.

As we enter into the first full trading week of May it would be pertinent to be cautious (although cautiously optimistic) until there’s a clear indication on what side of the major timeframes price is trading on.

We are currently trading well above the quarterly open so it would take a substantial amount of selling to turn that chart red.

That being said the week ended with all the indices posting shooting stars so the short-term weakness could continue however so long as the higher timeframe remains up expect to see dip buyers in full force.

Gold and TLT logged inside weeks so let’s see if it’s their turn to play catch up this week.

Finally, cryptos all sailed higher as BTCUSD reclaimed 9000 and there were a plethora of coins that are setting up potentially multi-week moves to the upside. Check out the video to see how I positioned myself into the rally.





Now watch this week’s Weekly Outlook video to see the setups and levels we’ll be watching as well as the technical outlook for the VXX SPY QQQ IWM DIA EEM TSX TLT GLD MGC BTCUSD EEM and more for the week of Weekly Market Outlook For – May 4-8, 2020.

 

When Will Things Return to Normal?

As the countries around the world race to re-open their economies the real question in my mind is, when will things really return to normal? 

Will the re-opening of the economy convince citizens that things are back to normal and we all pick up like nothing happened or will PTSD like fears linger?

In a recent note to investors, Howard Marks from Oaktree Capital asks some poignant questions about our collective psyche and where we are likely to go from here.

Assuming the quarantine is lifted:

  •  when will you take your first flight? How will you react when the person next to you starts coughing?
  • what has to happen to make you feel it’s safe to send your child back to school?
  • what will happen when everyone returns to work, allergy season begins, and a few of your colleagues begin to sound nasally and cough persistently?
  • when you go out to dinner with your wife/husband/friend/family, do you want to be served by a waiter/waitress wearing a mask and gloves?
  • If a test says you have immunity, will you stop social distancing and go back into public spaces while new infections are still being reported? And for us New Yorkers, when will you get back on the subway?

Questions like these suggest that a mere message from government is unlikely to get everyone to return to their former habits, including their jobs (if they have a choice).

Instead, the reopening of the economy is likely to be gradual and, until a vaccine is perfected or herd immunity is reached, subject to alternating periods of progress and retreat.

 

Thinking about the Coronavirus in Technical Analysis Terms

Let’s examine – the overall death rate from ALL causes – that way we don’t get bogged down in whether the COVID-19 numbers are accurate, or just exactly what the death rate is, etc. One can assume that the divergence from the norm is COVID-19.

The overall death rate in every country has crashed through not only the 50- and 200-day moving averages, but the 100-year moving average. And that is AFTER the “market circuit breakers” have been tripped (shelter-at-home orders).

Follow your own advice and follow your stop losses. Shelter at home. Because what is at risk are lives – not mere dollars that may be recovered in a market recovery.   Source:  Bonner and Partners

 

Stay strong, and happy trading!

Houston

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Weekly Perspectives: When Will Things Return to Normal?

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