New York, New York (PPD) — The legendary Marty Zweig made famous the Wall Street axiom “Don’t fight the FED and Don’t fight the Tape”. While the “Tape” hasn’t existed in a natural form for many years, it should never be overlooked that the Stock Market remains the greatest predictive tool we have.
On Monday, March 23 the closing prices for the Major Market Averages hit their current lows for the Coronavirus selloff. The Dow Jones Industrial Average (^DJI) closed at 18591.93. the S&P 500 (^SPX) at 2237.40, the NASDAQ Composite (^IXIC) at 6860.67, and the Dow Jones Transportation Average (^DJT) at 6703.63.
At the Monday lows, the Dow, S&P 500 and NASDAQ had declined from their all time highs in mid-February by -35%, -32% and -30%, respectively.
Since Monday, three trading days later, the (^DJI) rallied +21.3%, closing Thursday +1351.62 (6.38%) at 22552.17.
With the Dow (^DJI) closing above 22310.40 — more than +20% above the March 23 close — by definition this technically signals a new Bull Market.
That being said, I’m sure many market pundits and media magnets will wave it off as, ”yea, but it doesn’t really count ”. Or maybe we’ll hear the four most dangerous words on Wall Street, “It’s different this time”.
What’s the reality? In today’s worlds, anything is possible. Quoting one of my mentors from a few decades ago, “The data speaks for itself. Interpret it however you wish.”
The S&P 500 (^SPX) has rallied +17.5% in three days, and. +154.51 (6.24%) on Thursday to close at 2630.07. We would have to see a close of 2685 for the +20% threshold to be met.
The NASDAQ Composite (^IXIC) has rallied +14% since Monday and +413.24 (5.60%) on Thursday to close at 7797.54. The NASDAQ would have to close at 8233 or higher to hit the +20% marker.
The Russell 2000 (^RUT) closed Thursday at 1180.32, a +69.95 (6.30%) rally from the closing low last week. The low close for the Russell on March 18 of 991.16 was a -41.5% decline from the February 20 high of 1696.07. A close above 1190 would mark a +20% rally off the lows for the Russell 2000.
The Dow Jones Transportation Average (^DJT) closed +320.60 (4.15%) at 8045.47 on Thursday, a rally of +20.02% since Monday. The Transports had declined -40.7% from its recent highs in mid January.
The Coronavirus Epidemic, has sparked an unprecedented national response. The market response has reached historic levels of price reaction. While by this I mean volatility, I do not want to confuse action with the CBOE Volatility Index (^VIX) as a metric of volatility.
Is it possible that the “Bear Market” we entered on March 11 really lasted only 13 or 14 trading days? Only time will tell.