The Sound of Movement

The sheer velocity of the last two overnight gaps higher on the indices speaks to how vicious relief rallies can be in the midst of bearish trends. While it is true that there may be some debate as to whether any bear market has been terminated, the reality is that as we speak today all of the major indices, be it the Dow, S&P, Nasdaq Composite, and Russell 2000 are all operating below declining 200-day moving average. As a result, I remain hedged with a heavy cash position waiting for a better spot to attack. 

Violent price movement is not the exception in these sorts of markets. Instead, it is the rule. Thus, bemoaning about the swings is not a particularly constructive mindset to have, especially since the swings could easily persist at least another several weeks or until we have some sense of when the economy will be permitted to at least try to regain a sense of normalcy, albeit one in a new socially-distance normal. 

Laggards like CCL DAL continue to lead the bounce while names which have benefitted from the quarantine/lockdown like TDOC ZM and grocery stores are lower, perhaps, due to optimism that a re-opening of the economy is relatively within reach. 

However, I remain skeptical of such a scenario to materialize before Memorial Day due to various risks regarding the highly contagious virus. As an example, the New York Post is headlining a story right now that at least 51 patients diagnosed as having fully recovered from the coronavirus in South Korea have tested positive a second time after leaving quarantine, according to officials.

Recall that South Korea has been praised for its handling of the virus. So if they can experience such a recurrence, why wouldn't America, too? 

Again, these are considerable risks which has me in the camp of thinking that even if recent lows are good lows from March, rallies like this one still likely run out of steam sooner than later to knock out a loose and sloppy range with tons of movement, at best.