Stocks remain in the midst of a historic period, as the market is forced to come to grips with perhaps the quickest turn of events for the economy in modern times. The Nasdaq sits 32% off its high.
My feeling has been that if the damage is "limited" to a 40% bear market, that would be a relief. That would include 1-2 quarters of declines in GDP (gross domestic product, i.e. economic output) which the market is believed to be discounting (pricing in). It would not include any sort of implosion of the corporate debt bubble.
Please note that this is not a crystal ball forecast. I am not an expert on the economy. It has absolutely no bearing on our market strategy as technical traders. However, if you are like me, and I have received a few subscriber emails over the past year about this, you wonder about the future and how events might play out.
In the meantime, there are a few bright things of which to take note. As previously mentioned, the growth sector shows blatant outperformance for the first time since the Nasdaq Composite was created in 1971. The QQQ is shown below. Also known as the Nasdaq 100, or NDX, it comprises more than 90% of the Nasdaq Composite.
The upward tilt is so dramatic that a number of times I have had to double-check my RS line indicator to make sure the Nasdaq or QQQ was being properly drawn against the S&P 500.
Another positive is the speed with which the market is discounting the economic slowdown possibility. Getting the selling out of the way over a condensed period of time is much more preferable to a slow-drip bear.
The game plan remains the same: It is not feasible to take any swing-trader entries on the short side until the volatility and major opening gaps settle down. The favored vehicle to use in such a market would be the SQQQ, the 3x inverse of the QQQ.
And on the long side, we would need to see real conviction of a new trend up, e.g. an O'Neil follow-through day, at least. Even then, exposure should be limited to pilot buys.
The following names are some of the better actors from our 29-issue Watch List. Obviously, none should be taken. All need more repair done to their technical patterns.
GSX Techedu (GSX)
Teladoc Health (TDOC)
Vir Biotechnology (VIR)
In sum, cash is king.
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Individual stock charts created using MarketSmith. ©2020 MarketSmith Incorporated. All other charts created using TradeStation. ©2001-2020 TradeStation Technologies. All rights reserved.
The views contained herein represent those of Marder Investment Advisors Corp. At the time of this writing, of the stocks mentioned in this report, Marder Investment Advisors Corp., Kevin Marder, or an affiliate thereof held no positions, though positions are subject to change at any time and without notice. Estimate data provided by FactSet. Expected earnings release dates provided by EarningsWhispers.