The upturn in the US stock market, which was largely due to a short tightening, has recently run out.
Without positive news, the stock market would have sunk.
But the stock bears were unlucky when a report surfaced Thursday after negotiations closed that an antiviral drug, Gilead’s remdesivir, holds promise in the treatment of patients with coronavirus.
There was an interesting development on March 23, which turned out to be the downturn in the stock market. I wrote at the time: “There are a lot of antivirals being tested, and the significant good news from one of the major drug trials will likely result in a 5,000 point rally in the Dow. Of course, other indices would also increase. “
This shows the power and benefits for the stock market investor to do a scenario analysis in advance.
Scholarship win statement over anecdotal evidence about Gilead
Remdesivir treatment is premature – later. However, the stock market reaction shows that a rally of 5,000 Dow points is highly likely if a true the remedy is found. Recall that the Dow Jones reached 29,569 in February – just two months ago.
No stock market investor should underestimate the risks of coronavirus that are to come. There is a prudent and logical way to navigate the stock market in this volatile coronavirus situation that has proven itself since the January 22 report in the Arora report called for a potential stock market downturn due to the deadly virus.
Let’s discuss it.
Please click here for an annotated graph of the Dow Jones Industrial Average ETF SPDR
following the Dow Jones industrial average
Please click here for an annotated graphic of Gilead.
Please click here for an annotated graph of S&P 500 futures
who are the futures of the S&P 500 index
Note the following:
• The first graph is monthly, giving a long-term perspective. This graph should be the starting point for any analysis.
• The second and third charts are 15 minute charts to help investors focus on what will happen on the stock market if a real cure is found.
• The first graph shows that in the absence of other good news, the stock market is ready for a significant decline.
• The second graph shows the timing of after-hours trading when the news from Gilead appeared. At first, the reaction was softened because analysts and smart money took a critical view and knew there were limits – a celebration was premature.
• A little later, when a TV station reported the news, Gilead’s stock took off, as the graph shows. It’s no secret that this stock exchange is controlled by the momo (momentum) crowd, and the momo crowd is not known for in-depth analysis. The Arora report’s signal to buy Gilead shares to take advantage of momo’s crowd was intended only for super aggressive investors.
• The third graph is the most instructive. It shows a rally of 850 Dow point futures over the history of Gilead’s coronavirus.
• The second and third graphs show the VUD indicator. The VUD indicator is the most sensitive measure of net demand for real-time supply.
• The VUD indicator shows strong net demand not only for Gilead stocks, but for money paid on the stock market.
Ask Arora: Nigam Arora answers your questions about investing in stocks, ETFs, bonds, gold and silver, oil and currency. Have a question? Send it to Nigam Arora.
ray of hope
Gilead’s remdesivir provides a glimmer of hope. The report examines patients with coronavirus in a Chicago hospital who received remdesivir. They recovered quickly. However, this trial is only a small part of a multicenter trial. The published data are uncontrolled – there was no control group – and anecdotal. We have to wait for data from the double-blind, placebo-controlled study.
The second and third graphs linked above show that there is currently too much euphoria on the stock market. This is a danger signal for prudent investors.
In our analysis, the most likely scenario is that remdesivir will be helpful but not first-line treatment for coronavirus.
Answers to your questions
The answers to some of your questions can be found in my previous writings. You can access it here.
Disclosure: Subscribers to the Arora report may have positions in the securities mentioned in this article or may take positions at any time. Nigam Arora is a trained investor, engineer and nuclear physicist who founded two fastest growing Inc. companies. He is the founder of The Arora Report, which publishes four newsletters. Nigam can be contacted at [email protected]