The question I keep asking myself is this, how long will this bear market rally last, and yes, I still think this is a bear market rally. There are zero reasons that the market was up for the week and especially for how much it was up. The DOW and S&P 500 both gained a whopping +12 on the week with the S&P 500 having its biggest one-week gain since 1974 when it gained +14%. The NASDAQ brought up the rear with a +10% gain, having it's best week since 2009. But why?
Two reasons really, the Fed and a flattening curve of the Coronavirus pandemic.
This week the Fed announced as a large number of programs, including loans geared towards small and medium-sized businesses, that will total up to $2.3 trillion. They also gave more details on its plans to buy investment-grade and junk bonds going forward.
As for the Coronavirus, the number of new daily confirmed cases has dropped globally. In the U.S. New York state has also reported a decline in its virus-related hospitalization rate, which led the markets and trader sentiment to believe that we are turning the corner, but are we?
I still believe that we are in a bear market rally and that rally has to end at some posting testing the lows once again. Here's a couple of reasons why.
1. We're still a few weeks or more from opening the economy both here in the U.S. and globally. This will continue to put pressure on businesses to survive and prolongs the workforce from getting back to work.
2. And this is the big one. We have yet to see the impact that this global shutdown will have on corporate earnings. Once those numbers start rolling in, we could be in for extreme volatility, which could lead to a big mover lower.
So, what do you think? Can this bear market rally last?
Key Levels To Watch Next Week:
- S&P 500 (CME:SP500): 2,191.86
- Dow (INDEX:DJI): 18,213.65
- NASDAQ (NASDAQ:COMP): 6,631.42
- U.S. Dollar (ICE:DX): 98.28
- Gold (NYMEX:GC.Q20): 1,671.20
- Crude Oil (NYMEX:CL.K20): 28.36
- Bitcoin (BITCOIN:BITSTAMPUSD): 5,626.349