Sometimes you have to wonder what it will take to cause this market to really panic. Market players have had so much success for so long when they buy a gap-down open that even news that President Trump has contracted a deadly virus can't scare them away.
The president's positive Covid-19 test has caused much excitement Friday, but the market reaction has been quite mild. The low of the day was at the opening print and stocks have bounced strongly. Breadth is still around 2 to 1 negative, but the Russell 2000 small-cap index (IWM) has fully recovered and the DJIA is down a little over 0.5%. Based on that action it sure doesn't look like the news is very important.
There are a couple of things that are helping to contain the selling. First and foremost is that the market is still hopeful that a stimulus bill will be passed by Congress. House Speaker Nancy Pelosi made a couple of positive comments about the likelihood of a deal and the Trump Covid drama probably will intensify the pressure to do something.
Another positive is the outperformance by small-caps. That is an indication that there is still much focus on stock-picking. There is not a rush for the indices and indiscriminate dumping of stocks. Instead, there is still optimism about the improvement in the economic situation and concerns about over-valuation are mostly contained to the FATMAAN stocks.
I continue to have a shopping list of stocks that I'm interested in building, especially if they slip lower. Some of my favorites are Big 5 Sporting Goods (BGFV) , Xeris Pharmaceuticals (XERS) , Nio (NIO) , Personalis (PSNL) , Ocular Therapeutix (OCUL) , Trulieve Cannabis (TCNNF) Pacific Ethanol PEIX and Walmart (WMT) (read my analysis here).
There is a high potential that there will be more folks in Washington diagnosed with Covid but the market seems to be taking it in stride. Keep an eye on the price action -- that remains the key. It should be quite clear that predicting news events this year is impossible.