After a weak start on Friday following disappointing news from Gilead Sciences (GILD) on its potential Covid-19 treatment, stocks worked their way back up with the S&P 500 managing a small gain. Covid-19 data continued to improve and there is some optimism about reopening the economy. However, what was most notable this week was that the market continues to look beyond the economic damage that this crisis is creating.
Most market participants attribute the lack of concern about these economic issues to the huge amount of stimulus that is being created. Still, it is hard to fully understand how the worst economic crisis we have ever seen is not creating more pressure on the stock market. The price action was downright bullish at times this past week and there appears to be a near-universal belief that everything is going to be higher a year from now.
Technically, the week ended about where it started except not quite as overbought. A V-shape move is still possibly in play but the momentum slowed and the bears were hopeful a deeper pullback would ensue. While it was a good setup for some downside that simply didn't work. The level of liquidity remained very high and there were plenty of buyers on even minor weakness.
Next week, earnings season continues with reports from big names. However, a poor reaction to Intel (INTC) after it withdrew earnings guidance, had no impact on the market this week. There will be some important reports on the roster, although this market simply is not embracing earnings as an excuse for selling off.
One dynamic that is helping this market is there are many folks with lots of idle cash. There's a belief that the price action is illogical but the longer it continues the more worried they are that they will be left out.
At this point, you have to wonder what would be a possible negative catalyst. Nothing seems to bother the market right now, so the potential for a surprise headline is high.
We are at an important technical juncture and that will lead to an interesting battle next week as we deal with significant news flow.
Have a great weekend. I'll see you on Monday.