Oil’s back, again, after it looked like it wasn’t. The West Texas Intermediate (WTI) crude oil June futures contract got off to a strong start today.
Then, by noon, it retraced its morning gains. Stocks sunk in response.
Now, the contract’s up, confirming to bulls that the oil recovery is likely to continue.
Whether or not that’s true remains to be seen.
But for today, rising oil was enough to spur the market on to a positive finish as the major indexes “popped” in the final hours of trading.
The Dow, S&P, and Nasdaq Composite all posted daily gains greater than 1.00%.
Next week, the rosy shift in sentiment could very well continue as investors gain a clearer understanding of when the COVID-19 lockdown will end.
“The market is getting used to the fact that maybe it’s going to be late May, maybe June,” Daniel Deming, managing director at KKM Financial, said.
“So, the question underneath this market is whether there is enough stimulus, enough liquidity to continue to support this market structure.”
Deming continued:
“At this point, the market appears to be okay with that, but if we all of a sudden get into the middle of May and it looks like it’s July or August [before the U.S. re-opens], that will be another issue for the market to deal with.”
Lydia Boussour, senior U.S. economist at Oxford Economics, warned investors that an economic revival could be slow-going due to reduced spending.
“Looking ahead, we expect the coronavirus will deal a severe blow to U.S. business spending via suppressed global and domestic demand, broken supply chains, depressed oil prices, tighter financial conditions and elevated uncertainty,” Boussour wrote in a note.
“This will translate into some of the largest pullbacks in capital spending of all time.”
The market is likely due for a “reality check,” but at present, bulls are in control. For short-term traders, that’s great news as stocks eye another leap forward next week.
And if equities are really headed higher, certain stocks – like MGM Resorts International (NYSE: MGM) – could see a huge lift in share prices.
After falling from an April high set several weeks ago, MGM is now gaining some positive momentum. The stock broke past both its minor bearish trend (yellow trendline) and its 10-day moving average today – both bullish indicators.
The stochastics indicator remains relatively low, too, suggesting that MGM has plenty of room to rise.
Should MGM trade above today’s high by a significant amount, it might make sense to go long with a trade trigger of $14.20.
With more remdesivir trials set to come out in the near future, the market will soon learn whether or not it’s an effective COVID-19 treatment. If it is, MGM could soar. And if it isn’t, MGM could still rise anyway as rising oil provides the market with much-needed stability.
Either way you slice it, MGM seems like a winner, especially now that “re-opening” talks are ramping up across the world.
