The indices were cruising along nicely as market players awaited a vote on the Senate stimulus bill. However, shortly before the close news hit that Apple (AAPL) was considering a delay in the release of its 5G iPhone and that several Senators were contemplating a challenge of the stimulus bill. The bill had some drafting errors and is already facing some tough opposition but the market was reassured over and over it would get done.
While it is still very likely that the deal will eventually be passed, it is not likely to be voted on by the House until Friday and the "sell the news" inclination is likely to build as the criticism of the bill continues.
Another issue that the market has to deal with is the impending release of unemployment claim numbers, unlike anything that we have ever seen. A rough calculation by the St. Louis Fed estimates an unemployment rate as high as 32%. Weekly claims will be released Thursday morning.
As I've been discussing, I've viewed this bounce as a counter-trend move that was likely to end fairly fast. While the selling in the final minutes Wednesday was more abrupt than I anticipated, it shows how this market is still at risk to negative headlines.
So far we have not seen any hard data on the economic impact of the coronavirus crisis but that will start to be reported very soon. Most companies are withdrawing guidance and visibility will be very poor for the second quarter.
The bounce Tuesday and Wednesday was classic bear market action. The counter-trend moves are always strong enough to convince a number of folks that the worst is over. When those bounces fail, though, the real pain of a protracted bear market occurs.
We will have to continue to wait for the politicians to finish their work Thursday. However, the news of the stimulus is being discounted very fast and the danger of bad coronavirus and economic news is increasing.
I sold down quite a few positions Wednesday and have raised my cash levels. I also initiated a small index short in the final minutes of the day.
Have a good evening. I will see you Thursday.