You might think I’m nuts, but I was very impressed with yesterday’s session, even though early gains eventually evaporated into the closing bell. I appreciate the spunk in the market, which didn’t completely succumb to selling until the close.

The Dow Jones Industrial Average (DJIA) saw a 1,000-point trading range from the opening to the closing bell. That would have been unimaginable weeks ago, but it has become par for the course. With major indices closing essentially unchanged, it was a mild session.

Before the coronavirus crash, the typical trading day was just three-quarters of 1% up or down. Last month, the average trading day was 5.1%, almost evenly split in 10 up sessions and 11 down sessions. 

In addition to influential stock market bears going on a media blitz to talk down the market, it was evident we had the wrong leadership. The market isn’t going to charge back, led by cruise liner stocks and beaten-down brick-and-mortar retailers. They’re fun to trade, but not the quality that has to lift the broad market to the top.

Breath of Fresh Air

Big market gains were erased. However, looking under the hood of the market saw a session with a lot more winners than losers, and a “De Minimis” number of 52-week losers. With Technology (XLK) stocks weighing the market down, the NASDAQ was the anchor. But even there, we saw more advancers than decliners and greater up volume than down volume.

The Message of Market

Six out of 11 S&P sectors closed higher on the session, led by Materials (XLB), which have become very compelling. The sectors have a lot of names I thought were oversold before the coronavirus pandemic. While we must make different macro assumptions, there is value there. The sector itself has the potential to rally 15% higher in the next broad market rally. The leaders could make much bigger moves.

SPDR TRUST SBI MATERIALS 

Portfolio Approach

Today’s Session

Equity futures started much lower overnight and have since steadily improved.  Of course, the intraday reversals are so wide, opening slightly higher or lower is no indication on how the session will evolve. Still, I would rather open higher after being lower.

We have put cash in model portfolio to work and want to hold rest close to the vest, as the country watches coronavirus trends for indication when we can star to grease the wheels of commerce again – which will initially be a slow grind.