- Data show little risk for the majority of people from COVID-19.
- The market’s resilience may be due to expectations for a return to work and a quick economic recovery.
- The market may be right or it may be wrong. Respect the price action above all else.
Editor's Note: This article has been updated to modify an unclear discussion of COVID-19 data.
As more and more data are being collected about COVID-19, it is becoming ever more clear that there is no reason for the majority of Americans to be confined to their homes. The stock market may be pricing in a return to sanity and a return to work.
When states reopen bars, restaurants, retail stores, beaches, etc., will people be too afraid to return to work, go to restaurants, the gym, to a ball game? I don’t think they will be. Not judging by their enthusiastic return to restaurants in Georgia and parts of Texas, or to the beaches of Florida.
source: USA Today
I think people are starting to realize that for those under 65 years of age and with no underlying health condition there is little to fear.
In a recent article published in The Hill written by Scott W. Atlas, MD, Dr. Atlas states:
“Of 6,570 confirmed COVID-19 deaths fully investigated for underlying conditions to date, 6,520, or 99.2 percent, had an underlying illness.”
Dr. Atlas is the David and Joan Traitel Senior Fellow at Stanford University’s Hoover Institution and the former chief of neuroradiology at Stanford University Medical Center. He also wrote:
“The overwhelming majority of people do not have any significant risk of dying from COVID-19.”
I think more and more people are coming around to the thinking that healthy people under 65 should get back to life and work while protecting and providing for the older and less healthy citizens until herd immunity is achieved or a vaccine developed.
Perhaps the virus data is the reason the stock market has held up so well. I can’t really say for certain. Just because the data look favorable for most people doesn’t mean the Governors will reopen quickly. I think they should, but what I think doesn’t matter. Those that have read my previous work know I really don’t like applying reasons to market movement and I detest long-term big picture grand predictions. I’m not saying there are not reasons for market movement, just that I try to follow price action without getting bogged down with a bias.
That people are ready to quickly reopen is my opinion. I may be wrong. The market may be wrong. None of us know for sure what the market is pricing in or how far out it is looking.
I have read some interesting articles here on SA over the last few days. Most are well reasoned with their bullish or (mostly) bearish analysis. The only problem, as I always write, is there are just too many unknowns both as to future events and market reaction to those events. My comfort zone is the price action and the charts.
So, let’s look at some charts.
This is my everyday, wash and wear, boilerplate daily S&P chart. It has various support/resistance levels, trend lines, moving averages and indicators. Moving on.
Source: Qcharts annotated by the author
I want to simplify things. This is as simple as I can make it. Fibonacci is in charge. In my experience, it is unusual to have a simple top to bottom retracement fit price action so well. A topping for now at the 61.8% area and several points of support at around the 50% area. Last Thursday and Friday seemed like kind of a big fall but in reality, it has just returned to a level where resistance and then support was found several times during April. The range is very wide because volatility is high and/or vice versa. The VIX is high. I expect we should get used to these wide ranges for the time being. A close below the 50% retracement at 2792 would make me more bearish although I think 2720 (black line on the above chart) won’t go down without a fight. In other words, while I would probably be in cash below 2792, I would likely be short below 2720.
Gold and Gold stocks have been the place to be. This chart shows the SPDR Gold Trust with a solid uptrend and appears ready to break upward from a bull flag formation.
Source: Qcharts annotated by the author
The COVID-19 data seem to pose little significant risk of death for the majority of the public. The market’s resilience may be a reflection of this and is pricing in a quick return to work and economic recovery. For now, it looks like we might have a new range between fib numbers. I will use those levels to control my risk and dictate my trading direction.
QuasiTrader is not really a HAL series 9000 AI bot. He is an actual flesh and blood human. Like all humans he is fallible. He makes clumsy human-like mistakes all the time. You would never want to throw real money at an idea any mere human might present. Maybe if he were a real HAL 9000 but, like I said, he's not. So, do your own homework.
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