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One Indicator Argues That We've Seen The Bottom (Technically Speaking For 5/7)

May 07, 2020 6:07 PM ETSPY, IWM, IEF, QQQ1 Comment
Hale Stewart profile picture
Hale Stewart


  • The Bank of England kept rates at 0.1% and published its assumptions about UK growth.
  • The damage to the jobs market has been severe.
  • The percentage of stocks below their respective 200-day EMAs is very low.

The Bank of England kept rates at 0.1% and offered its economic projections. Like other central banks, the BofE noted the outlook was very uncertain. Key were the following points:

Underlying the illustrative scenario for both the UK and the rest of the world is an assumption that enforced social distancing measures remain in place until early June and that they are then lifted gradually over the following four months, until the end of Q3. Fiscal support measures, such as the CJRS and the Self‑Employment Income Support Scheme, are assumed to remain in place, and to be unwound, over the same period. These assumptions should not be taken to imply that they are or should be government policy.

The economy will not simply restart at its previous level of activity; consumers especially will be cautious about going into group settings, which means consumer-facing retail will probably suffer for an extended period of time. This means there will be a ramping up of activity over at least the end of the 2Q20 and 3Q20.

Let's take a look at the damage contained in last month's employment report:Three sub-sectors accounted for most job losses. By far, the biggest component was leisure and hospitality, which shed 459,000 jobs, accounting for 64% of all losses. Education/health and retail were the next largest losses. Manufacturing and mining (read: oil) losses were remarkably light. Expect that to change in tomorrow's report.

Just how important are restaurants to cities? Very important (emphasis added):

“Restaurants are extremely valuable to cities,” said Andrew Salkin, a founding principal of Resilient Cities Catalyst, a nonprofit focused on strengthening cities, and a former official in New York City’s Finance Department. “The benefit of having good restaurants outweighs just their tax benefits. They are the anchors of communities. They support tourism and the neighborhood

This article was written by

Hale Stewart profile picture
Hale Stewart spent 5 years as a bond broker in the late 1990s before returning to law school in the early 2000s. He is currently a tax lawyer in Houston, Texas. He has an LLM in domestic and international taxation (MagnaCumLaude). He is the author of the book The Lifetime Income Security Solution. Follow me on Twitter at @originalbonddadYou can read his legal analysis on his law office's blog.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (1)

Pooh_Lover profile picture
It seems like with the exception of the trillion dollar companies most stocks are pretty hammered. MO @ $35. WFC @ 25 on and on.
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