A trio of stocks that benefit from the COVID-19 crisis reported earnings last night and are helping to improve the tone of the action this morning. Netflix (NFLX) added far more new subscribers than anticipated, but it seeing a mild "sell the news" reaction this morning. Chipotle Mexican Grill (CMG) reported a sharp jump in online ordering and Snap (SNAP) is higher, as it increased active users by 20%.
There is still limited guidance from most companies, but there are some beneficiaries of this crisis that are standing out. The more important issue is how bad the reports will be from those companies that don't have some sort of lifeline to hold onto as we await the reopening of the economy.
Oil continues to trade in chaotic fashion, but the shock of the collapse is starting to wear off as the reality of the situation sinks in. There will be a number of reverberations from the destruction of the oil market, but the big concern is how much of the demand destruction is seeping into other areas of the economy.
The battle over reopening the economy is intensifying. Georgia is taking a very aggressive approach -- and if there is any spike in new COVID-19 cases after it reopens gyms and hair salons, it is going to have a major impact on the market.
The one big danger this market is not focused on at this time is a spike in news cases after a peak is hit. It is very likely that there will be flare-ups in the future, but that doesn't seem to be a major concern right now, as the focus is on an overall decline.
The big issue for this market now is technical. The S&P 500 hit its 50-day simple moving average around 2855 after a massive countertrend bounce, and is now pulling back. In a bull market, we would normally look for the indices to regroup and make another run at the recent highs, but in a bear market, we are more prone to look for a failed bounce.
While I will let the price action call the shots, I believe that there is likely to be choppy action and a trading range as we work our way through earnings season and wait for greater clarity about reopening the economy. There are still quite a few bulls rooting for a Fed-driven V-shaped bounce, but some of the conditions driving that have dissipated now.
My game plan continues to be a short-term focus and minimal building of longer-term positions. There has been better stock picking action but the correlated selling picked up yesterday. If you are going to trade this market, it requires constant vigilance and fast reflexes.