Market Briefing for Thursday, April 23

A 'pivot-point' - for the projected rebound from our March 'Inger Bottom', in the midst of what I called max-fear panic following the Covid-contributed 'crash' looked for from early February, is what we have to assess now.  

This past week I looked for the S&P to ideally enter exhaustion, dip and to then rebound at midweek or so this week, and then possible resume that retrenching that began a few days ago. It's tricky, it's sort of an indecision just now from a daily-basis technical aspect, and we want you to realize it is 'fluid' in a sense, with the possibility (if they can hold Oil up a bit more) of holding together a bit longer.  

One thing this market rebound is not, is 'powerful'. It's being presented by a lot of 'observers' (some pundits and the President are not actually being analytical when they bemoaned the dip and then cheer-on a rally), while I am sure that the majority would 'like' the market to simply surge higher.  

Executive Summary:

• Technically the June S&P (front-month contract) was targeted to try to exhaust between the 50-day and 200-day Moving Averages, and it's a bit shy of the doing that, whch is still very much a possibility

• Concurrently, the market's extended (since late last week), hence with or without a bit more upside activity the next 'meaningful' move could be corrective in-general

• Hence the idea is of S&P 'setback' or retracing portions of the targeted rise (maybe a third to a half, more or less depending on developments, not so much earnings in this case, though some guidance does matter of course)

• Overall as I've regularly described, most market transitions tend to be a process rather than an event

• That was the case with the late January-early February toppy zone (a lot of stocks beginning corrections while they focused interest in just a handful of big-cap names to give an illusion of strength to the S&P, as I observed at the time)

• The bottoming process we identified in March essentially nailed it, by calling it a capitulation washout underway (before Ackman's over-TV insanity), which I labeled irresponsibly intended to freak investors after they had already been through the 'crash' we projected over a month earlier, hence (for new members here to know), I got angry at those 'after the fact' bears, so decided to proclaim it as 'The Inger Bottom'

• I indicated then, as I do now, that there is no assurance that's going to be an ultimate low, but that depends on 'when' we get useful antiviral progress, rather than roundabout discussions regarding treatment

• Ideally we'll get an announcement of an 'effective' treatment (far more urgent than an eventual vaccine) within weeks, and that would be the most bullish factor, 'regardless' of where the S&P is at such a moment

• This was evidenced last week when there was (somewhat justified or so it seems) hyperbole about Gilead's Remdesivir, which is one of the drugs I've mentioned as possibly useful these past few months

• The issure with Remdesivir is that it's an IV drug, so for now is NOT a medication that can be prescribed and taken upon early symptoms, it requires a hospital setting (that may evolve to outpatient but not yet, it may evolve into an oral formula, but again not yet)

• My contention remains that you need a prescribed antiviral to be taken at early symptoms and a positive test, not waiting to get really sick

• Again, for new members I wrote about it, about hydroxy-chloriquine, of antibody injections that may evolve also beyond hospital settings, and any promising agents periodically since .. well early February

• I mentioned tearing a bit when a member said I got his family to take it seriously and prepare, as I had stated I was buying N-95 masks, face shields and so on when they were still inexpensive and available, this was and remains heartfelt, as I worried I was being alarmist that early and also believed health and life were more significant than stocks

• And that continues, given that both before and after the 'crash' I have tended to tie 'real' economic prospects to health & science progress in this area; and less so to the movements (even though calling them) of the stock market

• That takes me to a subject I'll expand on in a moment, insecurity of all of the treatments and guidelines being proposed regarding 'reopening

• Time limits what I'm going to say, but I was pleased to see a President urging Georgia's Governor 'not' to open massage parlors or the like (or barber shops and absurd tattoo studios), that's political in a sense, and maybe Georgia backs-off and Trump takes a bow, all that is less relevant than Atlanta's Mayor saying "not happening"

• Perhaps the President can now turn a bifurcated perspective on rebel or comply, to Oklahoma, where another Governor states so late today that it didn't make the news, he wants to do the same

• Most reasonable citizens want out of this cocooning (I sure do, I put the hours in more than usual because I can't even go to lunch!) and it is truly a bipartisan sentiment and challenge that we all deal with

• That let's me wrap-up this by noting the Washington Post did not misquote CDC Director Redfield, just the headline, and that indeed it's more complicated and difficult if Covid returns in the next flu season

• Not one of the 'experts' simply explained that the same small machine in most doctors offices that tests for 'flu', and also test for Covid, with a different swab and special reagent, the Abbott unit is one of them, and that all that hullabaloo was about differentiating between the two

• It was presented as a flu-shot argument, but flu shots often are at-best partially protective, so they simply could have said: test for both

• I won't delve into the Vaccine Director job-shoving, that's debatable but the general point of relying on science not cronyism, seems valid

• Tensions are building not only around Iran, but also Taiwan.

 

As to WTI, now that I hear people talking of negative 100/bbl and so on, I say foul, no that's not happening (or if negative at the next front-month roll, just briefly). Why? Because (especially with an antiviral), and with so much production shut-in for now (I disagree with those buying tanker stocks that already rallied), the in-ground oil becomes its own storage, so with nearly zero drilling, even modest economic recovery will slowly absorb surpluses and thus while I wouldn't trade for any of it yet, that's on the horizon.  

Bottom-line: we've had the rebound, they might be able to milk more out of it, and as I said before, normally you don't snap-back this much, only to then go make a new low. You could, but that would require circumstances to go in the worst direction, which common sense (even among politicians or at least most of them) abhors. The President, for one, knows very well that we don't have a viable 'oral' treatment for Covid-19, and that's what is need to, 'take death off the table' as a significant possibility, and surge the optimism of the nation. He knows that, and doesn't want to start this over, hence his rather sober grip on the reality of risks of premature openings.  

I say: reopen whatever is 'reasonable', gradually, and provide mitigation or containment strategies as 'necessary', to get the US cranking again. Don't roll-the-dice against the guidelines, or it might roll craps.