High yield corporate debt (HYG ETF) retested the daily lows below $79, and it appears they're holding. Notably, the local lows support is at $78 - a full dollar lower. Looking at the sensitivity of stocks moving in lockstep with the instrument, that would translate into quite many points before we could talk of an outlook determinant (HYG ETF holding above support with each preceding intraday downswing fizzling out) having changed.

Monday's intraday HYG ETF low was $78.20, and the S&P 500 low was 2771. For sure, seeing corporate bonds dive well below $79 wouldn't be a happy sight, but it's not unimaginable in the short run - especially given the key Friday's jobs data (these are more important than tomorrow's unemployment claims). Yet, stocks haven't tumbled on today's figures - technology is up, healthcare refused to decline, and the volume behind declining energy, materials and industrials, will likely remain below yesterday's levels, which would take away from the bearish implications.

So, despite financials being close to their intraday lows (at $21.47), the sectoral outlook isn't disastrous in any way. Judgmentally, what was the strongest headline driving stocks lower at the start of the week? Trump playing the China tensions card. Stocks are listening to it more than to coronavirus and its job market or other implications.

Thus, it makes sense to interpret market action in light of the magnitude of reactions to unfavorable news and the time that has passed since. Especially after holding up this well against today's ADP figures. Bluntly speaking, it's like "throw at me whatever you want, I'll recover shortly".

And we don't know when the next hit will come. Will it be chart-driven, or a headline one? Unless it breaks the back of the HYG ETF (its support, that is), it doesn't change the outlook for stocks.

We'll manage the open position flexibly according to incoming data and market behavior, but in light of the above tendency of the S&P 500 to prove resilient almost no matter what, we better adjust the open trade parameters so as not to be thrown out on any above-described microrotation. Please see the details below.

Trading position (short-term; our opinion): long positions (100% position size) with stop-loss at 2760 and initial take-profit target at 2935. Stay tuned as finetuning the open positions is likely ahead.

Thank you.

Monica Kingsley
Stock Trading Strategist
Sunshine Profits - Effective Investments through Diligence and Care