It’s not usually my style to make market commentary a regular thing on my public blog. I’d rather be sharing things that challenge your mind or make you consider strategic long term thinking vs short term emotional hype.

However, in light of current events, I am guessing that at least a few of my clients and friends will find this helpful. So here’s where we are today in markets, in my opinion of course.

Surprises?

The idea that GDP will be down enormously and that unemployment will be up enormously is baked in the cake -for the short term at least. The market “knows” this so therefore, tidbits of bad news here and there won’t move markets down further. At least that’s what I think. That’s also why a small bit of good news like we had on Sunday: “deaths maybe peaking, and other incremental good news out of NYC and US overall” - makes the market spike 5-6%.

Here are some things that the market is not pricing in:

Extended business contraction
Longer term disruption to some of the big “bulletproof” market leaders like big software companies
A second wave of infections
A vaccine or successful therapy, sooner than later (one positive thing on this list)

Markets love to find the positive news. And with central banks pumping cash into financial markets, there is a lot of extra cash looking for a home. So betting on the downside is a challenging enough bet anyway, but at times like this, with every power in the world trying to prop up markets, it’s even more difficult. And more telling if markets do drop!

Chart summary

Many market participants keep an eye on charts. Including me. They tell you where others have bought and sold in the past which may help us understand if certain price levels will bring in lots of buyers, or sellers. It also makes risk management more defined. If I buy and put a plan in place to sell at a certain price point, I limit my risk. It doesn’t guarantee success but does keep losses in check if I’m wrong.

That’s part of the reason people use charts. Here is a shorter term chart of our current market (S&P 500 index) with some commentary to give you some color on potential moves. And remember, this is purely from a price perspective. If real news hits, it can change things. but given all current news, markets will trade on price until the news changes.

Some points to notice on the chart (you can click it to make it bigger). There is a range, which we call a rectangle, between the yellow lines. A strong move above the yellow line could spark a further 20% move up in the short term where a move below the lower yellow line, combined with some new bad news, could send stock prices to new lows.

I point these concepts out further in the white lettered words on the chart below. Remember my point, absent any new serious news, stock prices will lead a life of their own. And usually there is an upward bias to markets, barring any news. However, any of the risk factors outlined above (or others) may have an effect here.

Note: Click Image to Enlarge