May 27, 2020

The S&P 500 has broken above the 200 EMA, which is a good sign the trend has changed back to the upside and a new bull market is taking hold. The HCM BuyLine® has now been positive for over 7 weeks and is still positive. 


Look at this Fibonacci chart. Since 1929, not a single instance of a -35% bear market with a 62% retrace led to new lows. Now, the 50% retracement has become the support. Notably, once the equity market recovers 62% of the losses, it is already deep into a bull market. This did not happen until July 2005 and December 2010, for instance. In both cases, deep into a new bull. The 50% retracement is new support, or 2,794 on the S&P 500. Interestingly, there was not an instance of equities subsequently falling below a 50% retracement. As evidenced by the chart below, this 50% retracement acted as support for equities. 


In the current context, this suggests the downside is limited roughly to 2,794 if this is a new bull market, which it looks like it is.

As for New York state, the original epicenter, the data remains encouraging. Daily cases are trending lower, as are new hospitalizations. Daily reported deaths fell to 73, the lowest since 3/24/2020 and the second consecutive day below 100. 


There were also positive developments on the healthcare front. Perhaps the most important is the study by the Korean Centers for Disease Control, which shows there is in fact no re-infection for any recovered patient in Korea. It has been reported that 447 Koreans showed "positive" test results after recovering, but their study of 64% of the "re-positive" patients showed that 100% of them did not have the disease but rather a non-active (dead?) virus. This is major news, because it supports strongly that there is no re-infection (immunity) and changes the dynamics around those recovered. In other words, they are the safest and basically not susceptible. The study even prompted Korea to change its testing around recovered patients, as they no longer see it necessary to test any recovered patient. 

No real signs of a new wave, but too early to call victory. We highlight the movers below. 


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