The indices paused slightly on Tuesday following warning of a revenue shortfall form Apple (AAPL) , but concerns about the economic impact of the coronavirus are still not gaining traction. Market players are content to embrace the view that the impact of the virus will be short-lived and that central banks have sufficient ammunition to offset any economic slowing.
There are two factors helping to hold up the market. The first is that the strength of the indices reinforces the view that the coronavirus is not a major economic negative. Perhaps market players are deceived, but the view is that if this virus really was going to be a major problem then it would show up in the indices. If the market isn't worried, then why should I worry?
The second factor at work is the "wall of worry" phenomenon. While many market players are very concerned about the economic impact that the coronavirus may have, the failure of the market to react causes concern that they are too bearish and may miss out. As the market climbs higher and ignores their worries, they put cash to work. That pushes the market even higher and causes more concern about being left out.
There are two approaches to the market acting this way. The first is to keep anticipating that it won't continue to act like this and that a day of reckoning is fast approaching. The pessimistic view is that the market is ignoring reality and that it will soon embrace the reality of the coronavirus problems, plus a number of issues that the bears are grumbling about.
The second approach is to stay focused on the price action and continue to ride it as long as possible. Perhaps a major reversal will occur but we don't know when or what will trigger it but we can react as conditions eventually change.ro There is some good trading if you focus on stock selection and trade management.
What works best is to focus on the micro and individual stocks rather than the macro and major news headlines. It may actually be better to ignore the news headlines and simply watch what stocks are doing. Market players like to think that they can navigate the news flow effectively, but in this case, the news flow is far more misleading than instructive.
Stocks are set for a mildly positive open. Precious metals are strong, Apple (AAPL) is bouncing and semiconductors are looking better after a hard hit on Tuesday.