Trading on Technicals, Stocks Extend Gains Off March Lows

New York, N.Y. (PPD) — As first quarter (Q1) earnings reports kick into full gear this week, their impact will be marginal, at best. Stocks are trading off a mix of technical data on both market averages and progress on fighting the coronavirus (COVID-19). Projections for both corporate earnings and the macro economy have clearly become dependent on when and how we come out from current shuttering a large majority of our economic activity.

The stock market staged a four-day rally last week, as the U.S. Federal Reserve took additional measures to stave off personal and corporate defaults. Further, we began to get data indicating the spread of the coronavirus may be peaking in the most densely hit population zones.

Despite the holiday shortened week, Major Stock Market Indices posted gains ranging from +10.6% for the NASDAQ composite to +12.7% for the Dow Jones Industrials, leaving all of the 3 benchmark averages with declines of less than -20% from their all time highs in mid February.

Seven trading days into April, market averages are at their best levels since March 10, five days before the Trump administration rolled out their initial “Stop the Spread” social distancing guidelines.

Market Internals were equally impressive. On both Monday, the 6th and Wednesday the 8th, we had +90% Up Volume days, paired with advance/decline stats that were positive by +10 to 1 on Monday and better than +8 to 1, 2 days later.

The Dow Jones Industrial Average (^DJI) rallied +12.7% last week to close at 23719.37. The Dow Jones has rallied +27.8% in 3 weeks from the March 23 low. The Dow is -19.7% below its all time high of 29552 in mid February.

The The S&P 500 (^SPX) rallied +301.21 points, or +12.1% to close at 2789.82. The S&P has rallied +24.7% from the March 26 low, and is -18.8% lower than its all-time-high (ATH) from mid February. Last week saw the largest weekly gain for the S&P 500 since October 1974, over 45 years ago.

Just to put 1974 in perspective, President Richard M. Nixon resigned the Presidency in early August. Ten weeks later, the stock market bottomed out in mid October with the Dow Jones between 580.00 and 590.00.

That is not a typo. In mid October, 1974, the Dow reached a secular low below 600.00.

The NASDAQ Composite (^IXIC) rallied +10.6% last week to close at 8153.58. Last Wednesday and Thursday was the first time the Nasdaq closed above the 8000 level on consecutive days since March 5 and 6. The first close ever above the NASDAQ 8000 level came just less than a year ago on April 16, 2019. The Nasdaq has rallied +18.8% from the March 23 low, and remains at a -17.6% decline from its mid February peak of 9817.18.