We finally got that relief rally aka bear market rally. The S&P 500 and Russell 2000 rallied more than 5% each. But it was the DOW that stole the show. The DOW rallied 11% or more than 2100 points. It was the DOW’s best day since 1933 in terms of percentage.
Stocks staged a monster rally on Tuesday, with the battered Dow Jones Industrial Average posting its best day since 1933, as Wall Street bet that Washington’s warring political factions will coalesce around a $2 trillion stimulus package to combat the effects of the coronavirus.
Negotiations over the package, meant to backstop reeling consumers forced to stay home from work and throw financial lifelines to key industries, helped major benchmarks reverse a bloodletting that’s dragged them deep into a bear market.
The repeat stalling of the Senate’s bill came in the wake of U.S. Federal Reserve unleashing its own new and extensive measures designed keep corporate credit flowing, and other critical parts of the economy functioning smoothly. The new program included unprecedented measures from the Fed, including purchases of eligible corporate bonds from companies and exchange-traded funds, and purchases of commercial mortgage-backed securities.
COVID-19 has not infected over 400k worldwide. In the US, there are close to 50k people infected with COVID-19 with New York being the epicenter of the US. New York Gov. Andrew Cuomo said New York is the “canary in the coalmine” with 25,000 confirmed cases of coronavirus, or more than half the current total.
According to economist Nouriel Roubini, he thinks COVID-19 is pushing the U.S. into a recession which could be more severe than in 2007-2009, with the potential to thing turning into a depression.
This week we should see a huge surge in initial claims, I’m talking more than 2 million claims. And in the weeks to come, that number is only going to increase. Hardest hit would be the entertainment and food sector with over 10 million jobs at risk.
If that’s not enough, the DOW recently formed a death cross. The death cross occurs when a short-term moving average (typically 50-day SMA) crosses over a major long-term moving average (typically 200-day SMA) to the downside signaling more pain is in store. Thus, this could be just some short covering, before the next leg down. However, if this rally is for real, I personally need to see price take out the immediate daily supply at 21000.
This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.
death cross.. that sounds bad 😅
indicates bearishness