what Monday’s market action is saying

Over the weekend Governor Cuomo of New York said that new coronavirus hospitalizations (that is new patients admitted minus patients discharged) may be plateauing.  Similar news came from Italy and Spain this morning.

While this doesn’t imply that more negative consequences of the pandemic won’t continue to build up, it suggests that the doomsday scenario of the creaky national health care apparatus imploding won’t occur.

 

Wall Street took this news as the occasion for a rally, which continues to strengthen as I write this.  (Is the worst in stock market terms over?   ,,,I have no idea.)

A day like this is chock full of information, most of it general concept stuff rather than specific buy/sell signals.

Stocks are up by 5% plus.  One should expect that the most heavily beaten down stocks should be rebounding the most and that the relative outperformers should be lagging.  No news there.  But where are the outliers?  For example:

–hotels and resorts seem to be up close to 15%, cruise lines, too, but airlines aren’t moving

–the Russell 2000 is leading the major indices up, but even though the NASDAQ has significantly outperformed on the way down, it’s even with the S&P 500 so far today

–Zoom (ZM) continues to play its contrary role–the worse the virus news, the better ZM has been performing.  But the stock is down today, and way off its high of $160+ a short while ago.  I haven’t paid much attention to ZM but it seems to me a holder (I was one but no longer) should be figuring out how much valuation support there is for it

–oils are flat to down, despite Mr. Trump’s (dubious, in my mind) claim to have brokered a production reduction deal between Russia and Saudi Arabia (more on this tomorrow)

 

What to do?  I look for two things:  individual holdings that aren’t acting the way I think they should, and changes in market leadership, which often come when the market begins to heal itself after a sharp decline.

 

 

 

 

 

 

 

selectively bearish vs. crazy

Today’s US stock market has, at least as I’m writing this at 11AM, a much different tone than yesterday’s.  Yes, it may be disappointing that there hasn’t been a bigger bounce so far back from yesterday’s mauling.  But at least there seems to me to be a lot more selectivity to what’s being bought and sold.  The losers appear to be companies directly affected by the consumer quarantine, the winners the least consumer-facing.

A second pattern continues, though, that trading is being driven, among the losers at least, by reaction to media headlines rather than investor forethought.

 

For me, one of the more puzzling aspects of the US market throughout my professional career has been the fact that virtually no institutional money managers ever beat their benchmark index.  If, ex broker fees and commissions, investing is a zero sum game, there must be winners (who don’t disclose their results) to offset the highly visible losers.  It could be that the fees and commissions are the reason, but the extent of the professional losses seems to me to be too high.  This leaves private individuals.

I mention this because the reports I’ve read indicate individuals are buying as institutions are forced to sell to meet investor withdrawals.