Break On Through
One of my favorite songs in college was named “Break on Through” by the Doors, a rock band led by legendary vocalist Jim Morrison. The song had a mesmerizing beat and poetic lyrics. It was one of those tunes that, once you heard it, would stick in your mind for quite some time. This song comes to mind today because the technical analysts who decipher stock market activity will tell you that the Dow Jones Industrial Average (DJIA) and the S&P 500 have recently “broken through” resistance. What does this mean?
For the past eight weeks, the market has been as volatile as I can remember for a long time. In fact, we experienced the fastest conversion from bull market to bear market in history. Early in this time frame, I was tracking daily market changes as I always do and recorded 12 of 15 days with market swings up or down of 4% or more, including nine days in a row of 4%+ moves. That’s three weeks of trading with the “norm” being a 4% daily shift in value. In my opinion that is nuts, very mentally exhausting, and not sustainable.
More recently, the market has settled into a less volatile pattern. For your reference, the DJIA has been in the 21000-24000 range for about one month. If you look at the charts, you will also see that during this time frame the market has been generally lifting higher. Today we “broke through” 24000 on the DJIA and 2880 on the S&P, a key level of resistance according to our technical analysts.
Does this mean the worst is behind us? Is it safe to go back into the water, as one of my previous blogs asked? I would not jump to that conclusion. The economy is facing numerous obstacles, all which are quite novel. Companies will be reporting earnings that are severely impacted by the global shutdowns and reduced consumer spending. The COVID-19 shock to the system is likely to have more consequences than we realize, in my opinion. Quite simply, it would be too easy for the bear market to end, if you ask me. But I’ll take the respite.
The Doors song “Break on Through” was the opening song on their debut album. It was also released as a single in January 1967 (I was in first grade…had my favorite teacher ever that year), and the B-side of the single was a song called “End of the Night”. Perhaps it is a potential metaphor. Wouldn’t that be apropos?
I’ll close with another song that has recently been stuck in my head, Nessun Dorma. This song, written by Puccini, is an absolutely fantastic song with a soaring musical score. My favorite version is by Pavarotti. It has been in my head since I watched a movie recommended by a friend, “The Upside”. That may also be apropos.
Be safe.
Ralph McDevitt April 29, 2020
Any opinions are those of Ralph McDevitt and not necessarily those of Raymond James. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation.
