I thought maybe, just maybe, we'd get a little help in the future with two companies reporting.
First, Luckin Coffee (LK) might offer us a small glimpse, a shimmer of what's happening in China relating to consumer activity. It did give us a glimpse, but it was a glimpse in my past, the one where Chinese stocks were being reverse merged onto a U.S. exchange, squeezed higher, then revealed as frauds. It's not exactly a memory I enjoy.
This one act by Luckin will call into question virtually every Chinese company listed on the NYSE and Nasdaq. Fortunately, most of the Chinese names are benefiting from a rising tide lifts all boats Thursday; however, I would be a bit more cautious on how aggressive I became with some names. Anything that looks even a little hanky will result in punishment that outweighs reward.
We'll need to get back to the idea if the growth sounds too good to be true, it probably is in China.
Second, on the "help" front, was Walgreens Boots Alliance (WBA) . The company reported earnings per share of $1.52 on revenue of $35.8 billion Thursday morning. The EPS number beat by $0.06 while revenue nudged ahead of expectations.
Like many other companies, Walgreens management didn't provide much in the way of guidance. They mentioned the unknown variables of the pandemic but left the door open for both positive and negative impacts. Unfortunately, Walgreens is one name thought to be more on the Covid-19 proof side of the fence that would benefit from the continued unknowns.
Now, even as the market rallies, WBA finds itself at 52-week lows. In fact, you have to go back to 2013 to find a sub $40 level! It's one of the few stocks that appears to be a loser on both sides of the coin which I find a head scratcher.
Unemployment claims of 6.648 million crushed expectations of 2.8 million. Continuing claims rose 70% versus last week as well. Still, the market bought the down open on a bad number. It repeats the buying from last week, but that's not what juiced the market in the early half of the day. No, that came thanks to a tweet from Trump about a possible oil deal between Russian and Saudi Arabia that would cut production by 15 million barrels.
.....Could be as high as 15 Million Barrels. Good (GREAT) news for everyone!— Donald J. Trump (@realDonaldTrump) April 2, 2020
A cut between 10-15 million barrels most likely benefits Russia and Saudi Arabia more than anyone else. Sub-$30 oil still won't save many of the small players in the U.S.
I've seen some other fantastic points. With many countries essentially closed for business, where will the demand come from to push prices much higher than this initial pop? If unemployment numbers continue to swell, will higher prices at the pump be a positive for folks simply struggling to pay rent?
My biggest concern: what happens if no deal materializes? We'll likely see oil reverse course and give back its 25% to 30% gains as quickly as it garnered them. However, the shock to the bond and equity markets could send us back to the lows of March 23.
In other words, our risk just increased exponentially around the success of an oil deal. If it happens, I could see a very strong day for equities on the announcement, followed by a continued push into the $265 to $275 range, assuming a deal happens quickly. If we get a complete denial, then we put $215, possibly $200 into play for the SPDR S&P 500 ETF (SPY) .
The White House, in my view, seems focused first and foremost on the stock market, beyond your health, even beyond the economy. That makes every overnight position a risk, but intraday positions, especially on the short side, even more because you see the president has no qualms about tweeting news or even "possible" developments if he believes it will boost stock prices.
I wish I could tell you trading will get easy, and go back to something, anything, of the last decade, but I don't see it happening until at least post summer.
Tim Collins provides options trade ideas each day on Real Money Pro, our sister site for active traders. Click here to learn more and get great columns, commentary and trade ideas from Tim Collins, Mark Sebastian, Paul Price, Doug Kass, and others.