Since the March 23, 2020 low, the stock market has surged nearly 30% after the government hit the market with a powerful 1 (fiscal) and 2 (monetary) punch. Over the past few weeks, the Federal Reserve took rates to zero, announced unlimited QE, and just threw another $2.3 trillion to help stimulate both Main Street and Wall Street. Meanwhile, Congress approved $2 trillion in relief aid and they are now talking about doing more. This is more than the kitchen sink, this is the entire kitchen! Now that the market has bounced back and rallied sharply the next important levels to watch are the 50 and 200 DMA lines in the major indices. The market went from being over-sold to overbought in a few short weeks and is now due to pullback (to digest the recent move). The key going forward will be to see if it is a “healthy” pullback or something more severe. The answer will depend on whether or not the curve continues to flatten and how fast we can “return” to some degree of “normal.”

(Click on image to enlarge)

Monday-Wednesday’s Action:

Stocks soared on Monday after the growth rate of new cases slowed in many parts of the globe. That sparked a wave of hope that the curve is flattening. Over the weekend, President Trump warned that we are in for a very bad two weeks which is way the “good” news of the growth rate slowing was welcomed with open arms. Technically, the market broke above near-term resistance which was March’s high and that bodes well for the bulls. Stocks opened higher on Tuesday but spent the day falling. The Nasdaq hit the 200 DMA line which is near term resistance and a logical place for it to pullback. On Wednesday, stocks rallied nicely after Bernie Sanders dropped out and Vice President Joe Biden became the presumptive Democratic nominee to challenge President Donald Trump in November.

Thursday & Friday Action:

Stocks rallied on Thursday as the Federal Reserve fired another easy bullet and announced $2.3 trillion in new programs to help support the economy. Stocks were closed on Good Friday. 

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. 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.