The most striking aspect of the market action to start the week is the number of players and pundits anxious to proclaim that the worst is over. The price action is mixed, with the DJIA almost dead flat and the Russell 2000 small-cap index ETF (IWM) lagging. Breadth is three to four negative, but there is an undercurrent of support by those thinking that this may be their last chance to buy.
This attitude is produced in part by the impatience of market players that want to put this whole crisis behind them as soon as possible. They want to buy and embrace the idea that we have already fully discounted the bad news.
While that is possible it is more hope than reality since we simply don't have that much information. Maybe the news flow will be better than expected and the market will trend higher from here, however, the details of the impact of this crisis haven't been seen to any great degree yet. Staying at home for a few days when rent and mortgage payments aren't even late yet, isn't that big of a deal so far.
I don't want to sound overly negative but the rush to be bullish this morning appears to be much more of an emotional reaction than one based on factual information.
Many strategists believe the market will almost certainly be higher a year from now, and therefore it is a good idea to buy. No one disagrees that stocks will be higher down the road but they don't seem to worry much about whether this really is an optimal time to buy. They are tired of the coronavirus crisis and they want it to end. What better way to show your confidence and optimism than to put capital to work?
My view is that it is likely to take a while for all the ramifications to be felt in the market and that the best entry points have yet to be seen. While some stocks may be at higher points down the road, the risk of owning them will be much less than it is now.
It is a good sign that volatility has slowed Monday, although I've not made any sizable moves. Individual stocks seem to be lagging the indices and the vast majority of charts are still poor.