Author: The INO.com Team

Can This Bear Market Rally Last?

Posted on by The INO.com Team

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? Continue reading "Can This Bear Market Rally Last?" →

What Do We Call This Market?

Posted on by The INO.com Team

With back to back rallies to start the week, we have now rallied 23% from the March 23rd lows of 2,191.86 (for the S&P 500). Is this the start of a new bull market, or is this just a bear market rally within the broader confines of the bear market? Keep in mind that we are still roughly -20% lower off the all-time high for the S&P 500, which puts us solidly in the middle of the range.

All three major indexes triggered new green weekly Trade Triangles indicating that the overall market has moved into a sidelines trend or sideways momentum as the figures above would suggest. So where do we go from here?

Honestly, I don't have a clue, and I don't think anyone else does either, but we do have the Trade Triangles to guide the way. My inclination, if I had to guess, would be that we'll continue to see high volatility as Coronavirus news will drive this market for good or bad.

Here are a couple of things to consider: Continue reading "What Do We Call This Market?" →

COVID-19 Opportunity - Laying The Foundation

Posted on by The INO.com Team

An opportunity to begin or reinforce a portfolio foundation amid the COVID-19 pandemic has been presented. COVID-19 was the back swan event that only comes along on the scale of decades. This COVID-19 induced sell-off has been the worst since the Great Depression in terms of breadth and velocity of the sell-off. This health crisis has crushed stocks and decimated entire industries such as airlines, casinos, travel, leisure, and retail with others in the crosshairs. The S&P 500, Nasdaq, and Dow Jones have shed approximately a third of their market capitalization, with the sell-offs coming in at 33%, 29%, and 36%, respectively, through March 20, 2020. Since then, stocks have attempted rallies. However, these have fallen short, and the lows are being retested. Some individual stocks have lost over 80% of their market capitalization. Investors have been presented with a unique opportunity to start buying broad market indices to lay the foundation of a portfolio or to reinforce long positions without single stock risks. Throughout this market sell-off, I have begun to take long positions in the broad market ETFs that mirror the S&P 500 ETF (SPY), Nasdaq (QQQ), and Dow Jones (DIA). It's important to put this black swan into perspective and see through this on a long term basis while viewing this as an opportunity that only comes along in decades.

Most Extreme and Rare Sell-Off Ever

Out of the 12 recessions that have occurred since May of 1937, the average sell-off for the S&P 500 was -31.6% with a range of -57% (2008 Financial Crisis) to -14% (1960-1961). The COVID-19 pandemic has crushed stocks beyond the average recession sell-off of -31.6%. The markets haven't reached the most severe sell-off levels by historical standards, so there's always a possibility for more downside potential. Regardless, at these levels putting cash to work would be prudent for any long-term minded investor. Continue reading "COVID-19 Opportunity - Laying The Foundation" →

Loss Of Jobs Weighs Heavy On The Market

Posted on by The INO.com Team

As we head into afternoon trading to end the week, the stock market is trading at or near the lows of the day after U.S. jobs fell by 701,000 in March, marking the worst jobs report since 2009, while the unemployment rate jumped to 4.4%. However, the report failed to capture the full extent of the economic blow being dealt with by the coronavirus outbreak. On Thursday, the Labor Department said jobless claims jumped by a record of 6.6 million for the week of March 27.

The DOW has been down over -2.5% on the day, with the S&P 500 losing -2.3% and the NASDAQ losing roughly -2.4%. After a brief mid-week bear market rally last week, the overall long-term downtrend has returned this week with the market posting a losing week, it's third in the previous four weeks.

The DOW will post a weekly loss over two percent at -3.3%, the S&P 500 checks in with a weekly loss of -2.5%, and the NASDAQ brings up the rear with a weekly loss of -2% as well. Continue reading "Loss Of Jobs Weighs Heavy On The Market" →

Seeing Beyond The Black Swan Event

Posted on by The INO.com Team

Just before the COVID-19 pandemic struck the S&P 500, Nasdaq, and Dow, Ray Dalio was recklessly dismissive of cash positions, stating "cash is trash." Even Goldman Sachs proclaimed that the economy was recession-proof via "Great Moderation," characterized by low volatility, sustainable growth, and muted inflation. Not only were these assessments incorrect but they were ill-advised in what was an already frothy market with stretched valuations. I'm sure Ray Dalio quickly realized that his "cash is trash" mentality, and public statements were imprudent. The COVID-19 pandemic has been a truly back swan event that no one saw coming. This health crisis has crushed stocks and decimated entire industries such as airlines, casinos, travel, leisure, and retail with others in the crosshairs.

The S&P 500, Nasdaq, and Dow Jones have shed approximately a third of their market capitalization, with the sell-offs coming in at 33%, 29%, and 36%, respectively, through March 20, 2020. Some individual stocks have lost over 70% of their market capitalization. Other stocks have been hit due to the market-wide meltdown, and many opportunities have been presented as a result.

Investors have been presented with a unique opportunity to start buying stocks and take long positions in high-quality companies. Throughout this market sell-off, I have begun to take long positions in individual stocks, particularly in the technology sector and broad market ETFs that mirror the S&P 500, Nasdaq, and Dow Jones. It's important to put this black swan into perspective and see through this on a long term basis while viewing this as an opportunity that only comes along in decades.

Most Extreme and Rare Sell-Off Ever

The abrupt and drastic economic shutdown and velocity of the U.S. market's ~30% drop within a month bring parallels to the 1930s. This sell-off has been extreme and rare in its breadth, nearly evaporating entire market capitalizations of specific companies. The pace at which stocks have dropped from their peak just last month from all-time highs is the fastest in history. The major averages just posted their worst week since the financial crisis (Figures 1 and 2). The Dow is tracking for its worst month since 1931, the S&P since 1940. As of March 20, the S&P 500, Nasdaq and Dow Jones have sold off 33%, 29%, and 36%, respectively. Continue reading "Seeing Beyond The Black Swan Event" →