Monday 27th, April 2020

Disclaimer: After my relatives asked for stock trades amid the coronavirus crisis, I decided to record below what I have been reading, what makes the market move, my opinions and the lessons I learnt across these readings.

Preferred source of business news: Bloomberg

Preferred source for trading strategies: SeekingAlpha

Quote of the day: “The stock market is not the economy... And the SP500 is not the stock market”

Opinion: As expected with the idea outlined in “Opinion” dated 21st of April, the WTI June futures are crashing as they dropped nearly 25%. This decline confirms the idea of the negative price for June futures.

Lesson of the day: Learn to time the market and that unknowns will always remain.

When opening my MAY 2750 PUT SP500 position, I was betting against the over-optimism of the investors. Yet, the SP500 unexpectedly kept rallying as the FED made unprecedented announcement, forcing me to close my position at 2760. I was hence battling against the FED, not the market.

Market news

· The five largest stocks now account for 20% of the S&P 500 market cap, exceeding the 18% concentration level reached during the dot-com bubble. Historically, such narrow breadth is a poor signal for future market returns. Stock-market breadth is an indicator of how many stocks are advancing relative to those that are declining. When a market has narrow breadth, it means a relatively small group of stocks is driving the upside in the market, while the majority of stocks are declining.

· Deutsch Bank post better than expected profits in 1Q report. Deutsche Bank stock rose as much as 6.7% in early Frankfurt trading. Posted net income of 66 million euros defied analyst predictions for a loss. The surprise growth suggests the lender benefited from a surge in client trading as the virus triggered violent market swings. Nonetheless, DB CEO warns “This extraordinary economic environment suggests that we will see a higher level of credit defaults”.

· Wall Street, helped by a new massive government aid program, ended Friday on a positive note despite the week was marked by mixed business results, disappointing indicators and oil yoyo.

· The NYSE rose at the opening Monday, encouraged by the hope of seeing the economy reopen soon at the start of a week rich in corporate results and meetings of central banks. The broad S&P 500 index, which represents the 500 largest companies on Wall Street, appreciated by 0.66% to 2,855.59 points.

· S&P 500 companies are expected to see profits fall by 15.2% on average in the first quarter and their sales will stagnate. The blow should be even harder in the second quarter, analysts currently predicting a 31.9% plunge in profits and an 8.2% drop in turnover.

PERFORMANCE UPDATE ON VIRTUAL PORTFOLIO MADE ON 19th March 2020