S&P 500 Market Outlook: Bearish

Viewpoint: Our view is that the economic shutdown will likely last longer than originally anticipated, each day will slowly erode the market’s confidence of a quick bounce back. This will not happen suddenly, but rather a slow eroding process. We are watching the major $235 level on S&P500 as support. 

Market: Volatility has pulled back and markets seem to have started to stabilize but things are not all well under the hood. OptionsPlay’s liquidity tracker shows only 112 liquid optionable symbols and GDP and earnings estimates took its largest dive this week. Using unemployment and consumer sentiment data, a 2020 recovery looks very unlikely outside of a medical breakthrough to combat COVID-19. We are looking forward to the earnings season to provide some quantitive data to better estimate the impact of COVID-19. 

Options Action Ideas

• MRNA – Front-runner for a COVID-19 vaccine and Michael Khouw’s trade. 
• NKE – Clothing spend from BofA credit card data falls 65%, we see downside pressure on NKE over the next month. 
• DG – Consumer staples with strong revenues and outlook as we head into a recession