EarningsBeats.com Digest

Published: Fri, 03/27/20

EarningsBeats.com Digest for March 27, 2020

What Might a Typical Bounce Look Like?

Personally, I'd be very surprised to see a "V-shaped" bottom for the U.S. stock market. There's still way too much uncertainty and the Volatility Index ($VIX) remains quite elevated, closing at 61 yesterday, despite the largest 3-day rally in equities since 1933. That extreme level of volatility makes me very nervous that another round of impulsive selling awaits. When I looked at the S&P 500's top performer yesterday (COTY), I realized it could be the poster child of a potential top on many stocks, industries, sectors, and major indices. Here's the chart:

Yesterday's high, which couldn't hold by the way, reached the first Fibonacci retracement level (38.2%) and also tested its declining 20 day EMA. But check out the relative strength panels at the bottom. COTY was a poor relative performer in the personal products space ($DJUSCM) throughout the panicked selloff. Then it was a major beneficiary during the three day rally as market makers finally provided liquidity to COTY and hundreds of other companies. Throw in what I'm sure was a huge pile of short covering and we get a 150% rally in a little more than a week. But yesterday's high will be difficult to clear, in my opinion.

Happy trading!

Tom Bowley

Chief Market Strategist

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