• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Doug Kass
    • Bruce Kamich
    • Jim Cramer
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing
  3. / Stocks

The Battle Between 'Sell the News' and V-Shaped Bounces

A round of very aggressive rate cuts are coming, but the market is inclined toward V-shaped moves. Which one wins is far from clear.
By JAMES "REV SHARK" DEPORRE
Mar 03, 2020 | 06:58 AM EST

On Monday, the DJIA enjoyed its biggest point gain in history as market players anticipate interest rate cuts by central bankers around the world. The Reserve Banks of Australia kicked off the party with a quarter-point cut overnight. Canada is on deck and both the ECB and the Fed are likely to cut soon.

The aggressive action by the central bankers are even more effective as the coronavirus news has not been as bad as many people have anticipated. China seems to have the situation under control in that country, there is some increase in the U.S., but it is quite small and other countries seem to be doing well with containment.

Many companies have cut back on travel and there is undoubtedly going to be some economic impact simply due to caution. The view of many market players is that dovish central bankers won't just offset the economic slowing of the coronavirus but will provide such a flood of liquidity that stocks will have little choice but to go up.

The stage is now set for a battle between V-shape market action and a "sell the news" response.

Typically, when the market makes a big move in anticipation of a news event, the actual news doesn't have as much impact because it is already discounted by the market to a great degree. If everyone buys in front of a major news event, there won't be as much buying power left to drive the market higher and some of those folks will take their profits.

That is what "sell the news" is all about. But that concept has not worked very well in recent years. A good example of that is how the market continued to rally after a trade deal was done with China. It was well anticipated, but rather than a "sell the news" response, the indices continued to trend sharply higher.

Also, there have been few "sell the news" responses to anything that the Fed has done. Even when rate cuts are a near certainty, the market never seems to fully price in the news.

The most obvious reason for the lack of "sell the news" responses and the inclination toward V-shaped moves is that the central banks are flooding the markets with liquidity. There is just so much cheap cash out there that it continues to flow into stocks regardless of the news flow or valuations.

Everyone knows that a round of very aggressive rate cuts are coming, but they also know that the market is inclined toward V-shaped moves. Will the nature of the coronavirus crisis and its economic impact change the inclination toward V-shaped moves? Many market players are saying no. We will see soon enough, but the idea of retests of recent lows seems very old fashioned in a market that has an endless supply of cheap capital.

Indices are treading water this morning as they consolidate yesterday's huge gain and look ahead to news flow about coronavirus and interest rate cuts.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, Rev Shark had no positions in any of the securities mentioned.

TAGS: Economy | Investing | Markets | Politics | Stocks | Trading | U.S. Equity | Coronavirus

More from Stocks

Bounce Takes Some of the Sting Out of a Painful Week

James "Rev Shark" DePorre
Mar 5, 2021 4:51 PM EST

It is premature to declare that the worst is over, but the intensity of the selling will go a long way toward helping a bottom to form.

The Selloff in Twilio Could Extend Deeper Into March

Bruce Kamich
Mar 5, 2021 2:30 PM EST

TWLO could bounce in the short-run but avoid the long side for now.

The Price Damage for Roku Is Not Over Yet

Bruce Kamich
Mar 5, 2021 1:25 PM EST

It looks like further declines are possible. Avoid the long side.

Roll the Dice on This Bounce

Timothy Collins
Mar 5, 2021 1:03 PM EST

This has given investors an opportunity to load up on small speculative names I love over the next 12 to 18 months.

Walgreens Boots Alliance Is Likely to Weaken Further

Bruce Kamich
Mar 5, 2021 12:44 PM EST

Let's check out the charts and indicators.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 11:38 AM EST GARY BERMAN

    The INDU and DIA

    FIBOCALL: The INDU index and the DIA The INDU ...
  • 10:44 AM EST JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    "The Challenge of Short-Selling"
  • 08:40 AM EST PAUL PRICE

    Recent Pick SpartanNash (SPTN) Raised Its Quarterly Payout by 3.9%

  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2021 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login