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What I'm Doing In The Stock Market Today

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The markets have been a rollercoaster of emotions over the past month with a bounce today following the worst one day-loss from the Dow since the Flash Crash in 1987. The Dow has had historic swings this week, exhibiting over 1,000-point fluctuations every day this week (3 down, 1 up).

Our 11-year bull run has finally come to a halt, with all the major stock indexes down over 25% from their recent highs.

Secretary-Treasurer, Steve Mnuchin, spoke on CNBC earlier today and said that fiscal stimulus talks are going very well. Mnuchin says that liquidity will be provided to the markets as need by both the Fed and the US government. This is positive news, but the markets aren’t going to start recovering until a concrete fiscal stimulus plan is laid out.

What To Do

Today’s bounce in my mind is an opportunity to limit your exposure and buckle down for a further drop. The markets are trending down right now, and if I learned one thing as a trader, it’s that the trend is your friend (until it’s not). I sold out of some calls I had purchased yesterday and am waiting to repurchase them when the market takes another dip (which I perceive as likely).

On the other hand, if you are a long-term investor, I would continue buying stocks at their discounted valuations. Bleed-red as you price-average down on your favorite falling equities because you don’t need to call a bottom when you are looking long-term. 52-weeks from now, you will thank me.

I would keep an eye on Disney’s (DIS - Free Report) shares for clues on market sentiment. DIS is a multifaceted corporation with operations ranging from media content to theme parks. This stock has lost over 30% of its value in the past month due to concerns surrounding its highly lucrative parks and concerns about movie releases.

Once consumer confidence levels increase and this pandemic is perceived as under control, we will see a sharp rally in Disney shares, which are trading at their lowest levels in over 3 years. I am a buyer of Disney right now and will remain to be if it continues to fall.

The Good News

China and North Korea have both illustrated an ability to contain the virus’s spread in their countries. The number of new cases in both nations has drastically dropped as they appear to be over the worst of this pandemic's spread.

The control of the virus took less than a month in South Korea, as you can see from the chart below provided by Worldometer.

The number of cases in the US is just beginning to ramp up, and we are just starting to take the proper precautions to control the spread of this disease. South Korea’s proven ability to control the coronavirus gives me hope that we will be able to stop the spread of this disease in a tolerable time frame if we act swiftly.

Continued Risk

The risk to the economy is escalating every day the virus advances, as the lasting impacts amplify with time. Fear has seemingly hit every corner of the US economy. Stores across America have been emptied as people prepare to lock themselves in their homes.

They have canceled or postponed all the major upcoming sporting events, including NCAA’s March Madness and The Masters golf tournament. The MLB, NHL, and NBA have all suspended their seasons in the wake of this virus.  

The number of coronavirus cases in the US is beginning to proliferate, and there are not enough testing kits to ensure that every potential case is evaluated. There could be thousands more that are infected with the coronavirus than the figures currently suggest.

Stocks I Am Looking At

I really like cloud-players right now at their discounted rates considering their immunity to the supply shock. My cloud picks include Adobe (ADBE - Free Report) , Microsoft (MSFT - Free Report) , and Splunk (SPLK - Free Report) .

Lockheed Martin (LMT - Free Report) is a strong defense play, and I have been slowly loading up on these shares. The company drives 70% of its revenue from US government contracts, and I don’t suspect Trump or Biden will cut back on defense spending.

I am not putting full positions on anything as the market grinds further and further down, but I am price-averaging down on some of the most oversold stocks.

Take Away

The bottom of this market drop-off is coming, but when and at what level is still a mystery. We need to see a solid fiscal stimulus plan before this market breakdown will reverse.  

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