The market pulled back last week but closed in the upper half of the weekly range which is a bullish sign. The market fell in the first half of the week but the bulls showed up and defended the 50 DMA line for the Nasdaq and Nasdaq 100 after Washington passed another round of stimulus. I have received a lot of questions from new members about why I focus so much on the Nasdaq and Nasdaq 100 and the answer is simple: because they are the strongest indices and are leading the rest of the market. I always look for strength and want to isolate where the big money is moving at any given time. This way, I can filter out all the noise and focus on the strongest stocks in the market. In fact, the Nasdaq and Nasdaq 100 are both “up” on the year and the major indices are still down. It’s VERY easy on Wall Street to get “lost” in the sea of noise. It’s important to step back and stay focused on the most important facts that matter. Everything else is noise. We are also approaching the end of the month which has a slight upward bias. Finally, it is important to note that we are still in the heart of earnings season and anything can change, anytime. But for now, as long as the Nasdaq stays about its 50 DMA line, the bulls remain in control. 

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Monday-Wednesday’s Action:

On Monday, oil prices imploded and fell to -40 a barrel at one point in the day. That was the first time in history it traded in negative territory and was the single largest decline – ever! That dragged stocks lower and the Dow fell over 500 points as energy prices imploded. In other news, the Nasdaq and Nasdaq 100 illustrated strong relative strength and continue to outperform their peers. Stocks fell on Tuesday after oil prices continued to plunge. The USO, which is the largest ETF that tracks Oil, was halted and a slew of energy stocks were crushed on the recent crash. On Wednesday, stocks rallied after oil prices rebounded from the steep crash earlier in the week. Netflix fell after reporting a very strong quarter. A slew of other stocks also reported earnings.

Thursday & Friday Action:

Stocks opened higher on Thursday but closed lower after Gilead’s remdesivir coronavirus drug did not help patients. Gilead noted that the study was “terminated early due to low enrollment” leaving it “underpowered to enable statistically meaningful conclusions. As such, the study results are inconclusive.” The Financial Times reported the news and said the documents accidentally published by the World Health Organization — showed that Gilead Sciences’ drug remdesivir did not improve coronavirus patients’ condition. The documents cited by the FT referred to a Chinese clinical trial. After the close, President Trump said he “may” extend the stay at home rule until early Summer. Right now most of the country expects to open May 15 but that may be pushed back. The bulls showed up on Friday and stocks higher, helping the market close in the upper half of the range for the week (which is a bullish sign). 

Market Outlook: Flood The System With Liquidity 
Global governments and global central banks stepped in with massive rate cuts and other “aid” packages to help “stimulate” both Main Street and Wall Street. So far, it is working as intended. As long as March’s lows hold, the market will likely move sideways to higher. On the other hand, if March’s lows are breached, then look out below. As always, keep your losses small and never argue with the tape.