The worse than expected jobs numbers for March did not generate any immediate negative response which is a good sign but it did little to create optimism about what awaits us in the month of April. Everyone was already expecting bad news but we still have little idea how bad it will grow in the weeks ahead.
The coronavirus news provides a few glimmers of hope but there are no indications yet that the apex is approaching. It is going to take at least another week before we will know if social distancing is helping in places like my home state of North Carolina.
Unfortunately, the uncertainties will continue to persist and that is reflected in the uncertain price action that we are seeing.
One positive today is that the trading range is a little narrower. It is starting to expand and who knows what will happen into the close, but when the range becomes narrower it is a signal that emotions are starting to calm down. Some flat action would be a very positive sign but there is no guarantee that the downtrend is over. It is a necessary but not a sufficient condition to a market low.
I'm going to continue to be a broken record and stress again that there is no urgency to build long term positions. If you can't resist the temptation of what might be bargains, then make sure you keep your buying very small and leave plenty of room to add at a lower point.
One theme trading I'm looking at now is masks and protective clothing. The main suppliers of these items are big-cap names like 3M (MMM) where the additional sales don't have any meaningful impact. Two smaller stocks that are purer plays are Lakeland Industry (LAKE) and Alpha Pro Tech (APT) .
I believe it is likely that there will be an increased push for the general public to wear masks. It is obviously a good idea but there is some reluctance to push the issue right now due to concerns about supplies for the medical professional. As that supply is met, there will be more promotion of use by the general public. These two small-cap names should be 'go-to' plays for traders looking to play the theme.
I'd like to write that this market is close to a bottom but I see nothing that indicates that is the case. Small-cap stocks (IWM) continue to lag and look like they may be the first major group to test their March lows. If the small stocks retest then the chances the big caps follow will increase. As long as you maintain high cash levels and great flexibility, that should not be a big concern.