The market is at an interesting juncture here as bulls are embracing the narrative that Covid-19 data is improving and that it has been largely priced into the market. The bearish response is that while the Covid-19 news may be better, there will still be significant economic impact that the market has yet to fully assess.
There have been a series of positive data points from various hotspots around the world and no major surges in new locations. That helps to improve the mood of the entire world, which spills over into the stock market. However, this is not a crisis that is likely to end as simply as a financial one that can be cured easily by central banks.
So far the gap-up open is being sold as many market players are looking at doing some repositioning after a nice bounce. That selling will pick up as doubts about a V-shaped move creep in. There will be a press conference from New York later today that will provide updated stats on coronavirus and that is likely to be a market mover. Any uptick in the stats will likely push this market into negative territory.
I continue to only make very minor moves right now. I'm holding high levels of cash and waiting for better charts to set up. It is particularly important to be clear about your market style right now. I consider myself to be primarily a stock-picker more than anything else and this still is not a very good market for individual stock selection.
The action continues to be very strongly correlated with individual stocks moving mostly in tandem. In a market that favors stock-picking there will be some very clear pockets of momentum. That is not the case right now.
In addition to being a stock-picker, I'm also a trend trader. I try to stick with the trend as long as possible. In a good market, I will try to stay heavily long until there is a shift in the trend. I will be heavily long near the top and will suffer some losses when the turn occurs but will, hopefully, have a big cushion of gains.
In a downtrend, my approach is the inverse. I will be holding very high levels of cash at the bottom but, hopefully, the losses I have avoided will provide me with a major advantage.
I'm holding high levels of cash right now because the trend is still to the downside despite the counter-trend bounces that have occurred. If this turns into a V-shaped bounce I will struggle to put cash to work but that is the nature of the beast at times.