As we head into the Easter weekend, with Good Friday tomorrow closing the markets, we’ve seen some encouraging market action. What will henceforth be known as the “Coronavirus Bear Market” has really tested investors in ways never really seen. But, while this virus continues to spread globally, and the economic damage it will ultimately wreak is not even fully revealed, there is reason for optimism. The market’s recent bottom occurred on March 23. Over the last couple weeks, we’ve seen our normal new confirmed uptrend pattern: a reversal day accompanied later by a follow-through day whereby large institutional investors poured money into the markets with heavy volume. This follow-through day was on day eight of the attempted rally, and the usual pattern is for that to occur between the fourth and seventh day, but there is plenty of precedence for successful later follow-through days. And since then, market action and chart behavior has improved further. This does not guarantee the current uptrend will continue, but each day that new gains are posted gets us farther away from that bottom, rendering it less likely that low will be undercut and kill the rally. That’s the dry but positive technical picture.
On the human side, just as we expected, this disease’s infection tally has been increasing, and will continue to do so. This stands to reason as we have not yet seen the peak and more comprehensive testing is leading to more infections being identified and therefore counted. And, along with increased infections has come, and will continue to come, more unfortunate deaths. The bright side of this are the reports of the pace slowing and pressure relieving somewhat on medical facilities and staff. At this moment, it appears the United States will escape the fate of some other countries’ healthcare systems, which have been overwhelmed. Our care centers are being monumentally stressed, for sure, but not swamped. At least not so far. For the reasons we’ve previously stated, expect our nation to lead the world in cases, and ultimately deaths. At least as to what’s officially reported. Recent stories validate our suspicion that China’s cases were vastly under-reported. But no matter how we analyze it, this has been a human catastrophe.
It’s quite possible that as this virus runs its course, the total tally of infections and deaths will be in line with that of other flu-like illnesses that occur continually. What makes this different are the economic effects of efforts to halt the transmission of the disease. The official narrative is rightly shifting to focusing on getting this economy and its workforce back on the job. This is what the financial markets are sorting out and reacting to now. If the nascent leveling off of cases continues as expected and we start to incrementally re-open businesses, we can presume a resumption of some semblance of normalcy in mere weeks, not several months. Completion of the process will take months, for sure, but progress toward full growth should commence soon. While a second wave or relapse might occur, promising news on a daily basis seems to argue against that for now. We’ve put new cash into the market over the last couple weeks, and will closely watch what comes about in the near future.