The President, government and US Federal Reserve have taken a “whatever it takes” stance on the coronavirus crisis. To that end, the Fed has deployed several tools reminiscent of the 2008 financial crisis. They cut interest rates by 0.5 percentage points early in March and vowed to inject $1.5 trillion through short-term small business loans and the purchase of Treasury securities. This past Sunday, they announced another 1.0 percentage point cut to interest rates and introduced $700 billion in quantitative easing. Tuesday, the Fed announced it would reopen the Commercial Paper Funding Facility for the purpose of underwriting short-term loans. Wednesday, the Senate passed the “phase two” coronavirus relief bill that included free testing, two weeks of paid sick and family leave, additional Medicaid and food funds and increased unemployment insurance benefits. Thursday, “phase three” of the bill was introduced and included government payouts to most Americans. Friday, the Fed bought an additional $15 billion in mortgage backed securities and pledged to buy $100 billion next week and $1 trillion a day in overnight repo loans. Additionally, the tax filing deadline was moved to July 15th. In fact, central banks and governments around the world have stepped in to help ward off the potential hefty economic hit to global economies.
Amid all this, it seems that no amount of stimulus, lower interest rates or fiscal policy has made a marked difference in stock market performance. Investors are more uneasy than they have ever been, fear of the unknown runs rampant and markets around the world have been devastated. Wednesday, all gains seen during the Trump presidency for the Dow were erased. WOW, over three years of gains gone in the matter of a little over a month. On the plus side, we did get news that accelerated clinical trials had begun for many new therapies for the coronavirus. Also, this selloff has created extremely attractive buying opportunities.
Thursday’s trading suggested to me that investors are itching to pick up bargains. When I look at Thursday’s Intraday Market Timing Graph, I see that the Price of the VVC moved lower at the open, reversed course around 9:46 AM and started moving higher. Throughout the day, the VVC remained relatively volatile, but you can see a pattern of higher lows and higher highs before finally ending with an overall gain, but off the high for the day. Thursday’s 1-day Derby Winners were all bottom fishing searches and up significantly. The top search, Bottoms Up, was up over 50%. Moreover, the top five 1-day winners were up an average of 38.62%!
But alas, although the market opened in positive territory Friday, it didn’t close higher. California, New York and New Jersey ordered all nonessential businesses to shut down. Fear returned and the Price of the VVC ended another day sharply lower.
If you’re a day trader, using the Derby, you cleaned up Thursday, but what about everyone else? Honestly, it is too early, by VectorVest’s measure, to tell if any rally is sustainable. One day does not make a trend. We’ll need to see the Price of the VVC move higher week-over-week to give us a preliminary signal of an uptrend. When the Primary Wave turns Up, we’ll want to see follow-through with an explosive up move. If you’re Prudent, wait for a green light in the Price column of the Color Guard.
This Coronavirus crisis has led to unprecedented losses and the situation is evolving daily. It has never been more important to stay informed. Follow the Color Guard, watch the Enhanced Color Guard Reports and the Special Presentations. Fill your idle time with some of our online coaching courses.
We do not want to forecast or get ahead of ourselves; we will let the VectorVest system do what it was designed to do. Remember, the VectorVest indicators gave us early warning signals to protect profits and play to the downside in January. They will also tell us when it’s time to buy. Until then, Be Patient.
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