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Here’s What Happened

Stocks increased significantly on Thursday, finishing up a major week of gains after the Federal Reserve outlined a whole series of measures to help the economy through the coronavirus pandemic shutdowns.

The S&P 500 added 1.5% to finish at 2,789.82, and the Dow Jones Industrial Average increased 285.80 points, or 1.2%, to 23,719.37, respectively. At 8,153.58, the Nasdaq Composite finished 0.8% higher.

The S&P 500 rose 12.1 percent for the week. This was the biggest increase in one week since 1974 when it exceeded 14 percent. Since 2009, the Nasdaq had its strongest week, rising 10.6%. For one of its biggest historic weekly gains, the Dow leaped more than 12 percent.

Rally By The Numbers via CNBC:

S&P closed up 1.45% for its third positive day in four

S&P closed up 12.1% this week, for its best week since Oct 11, 1974 when the S&P gained 14.12%

S&P is still down 13.65% year to date, on pace for its worst year since 2008 when the S&P lost 38.49%

S&P is 17.79% below its intraday all-time high of 3,393.52 from Feb 19

S&P is 27.28% off its 52-week low of 2,191.86 on March 23

Dow closed up 1.22% for its third positive day in four

Dow closed up 12.67% this week, for its best week since Mar 27 when the Dow gained 12.84%

Dow is still down 16.89% year to date, on pace for its worst year since 2008 when the Dow lost 33.64%

Dow is 19.78% below its intraday all-time high of 29,568.57 from Feb 12

Dow is 30.23% off its 52-week low of 18,213.65 on March 23

Sectors: 10 out of 11 sectors were positive Thursday led by Financials up 5.19%

SPY Market Conditions: Volatile

From February 19th to March 23rd, within a historic 23 trading days, the S&P 500 declined 35.6%. As of April 9th, the SPY is up 27.7% from March 23rd lows.

The Monthly SPY chart has formed a megaphone pattern. This broadening formation can be either a reversal or a continuation pattern that usually appears at market tops and bottoms.

Since 2018, each plunge lower has resulted in a long-tailed candle on high volume (yellow arrow & circle). Given the strength of buying into the March close, price is likely to test the upside of the megaphone (300-310) before the downside (200) for the fourth time. Should the market fail to reclaim resistance of the trend above, we could be setting up for a right shoulder on a Head & Shoulder pattern over the next year or two.

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Macro Trends This Week:

World stock valuations have fallen considerably, but are not at crisis levels.

Since 1967, heavyweight truck sales peak and then decline rapidly before recessions and bear markets.

This Fidelity Investments chart shows a high correlation (R² = 0.968) between stock prices and earnings since 1871.

This Morgan Stanley chart suggests a potential second wave of COVID19 infections in the fall of 2020.

The S&P 500 has likely bottomed when the second derivative of earnings revisions have bottomed.

Top Sectors for 2020: Tech, Telecom & Healthcare?

NYSE % of stocks above 200DMA is below 10% and as oversold as they were in '08-'09, 1987 & 1974.

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