Investing Amid the Coronavirus Outbreak

Our partner Argus Research hosted a conference call on behalf of Yahoo Finance Premium at 3pm ET on Monday, March 16, 2020. Watch the recording to learn about the COVID-19 pandemic's implications for the global economy and stock market. Not a subscriber? Start your free trial to join future webinars live!

Video Transcript

STEVE BIGGAR: Hello and welcome to today's Argus research webinar titled, "Investing Amid The Coronavirus Outbreak." This is Steve Biggar, director of product strategy for Argus, and I'm pleased to welcome all listeners to this exclusive call for Yahoo Finance Premium subscribers. Argus is pleased to have partnered with Yahoo Finance Premium to provide fundamental and quantitative stock research, macroeconomic analysis, thematic research portfolios, a focus list, technical analysis, and insider trading activity. These reports are all available from the Research Reports page, the dashboard, and individual company quote pages.

I also want to point out that Yahoo has also just launched its new Coronavirus News Hub, which can be accessed from the top navigation menu at Finance.Yahoo.com. This area has late-breaking news on the virus and great insight on health topics, the global response, and the virus impact on communities.

Now, with me on today's call is Argus President John Eade, Chartered Market Technician Mark Arbeter, Senior Technology Analyst Joe Bonner, and Senior Healthcare Analyst David Toung, who will all be going over their areas of expertise. We're also happy to take questions, some of which have already been submitted in advance. And if you'd like to ask a question, please send it through the webinar page.

So let's go ahead and get started. The equity market and fixed-income markets have, of course, been extraordinarily volatile over the last few weeks, as they try to factor in the potential impact on the economy and corporate profits from the coronavirus. So let me turn the call over now to Mark Arbeter, first to talk about what the market technicals are telling us right now. Mark?

MARK ARBETER: Yeah, the stock market has declined. The S&P 500 has fallen off a cliff over the past 17 days. We're down about 26%, 27% from the all-time highs we saw February 19, and we're down-- this morning, we got 2,400, very close to the December 2018 lows of 2,350.

My first chart is a daily chart of the S&P 500, not a lot of positives here. We've basically gone straight down since mid-February. I will say, and cut through support level after support level, calling for a bottom here is very treacherous. Each support level has given way. I will say, there are, you know, some potential positives on the daily short. Because of the climb was so steep, when we turn around, we should be able to see quite a substantial rally. On the way down, steep declines are marked by a lot of selling and very little buying. So there's very little overhead supply or chart resistance when we start to go back up. So you know, when we bottom, we could see some, you know, decent shots to the upside.

The other positive on this chart is the top panel 14-day RSI, putting in a potential bullish divergence. We need to see a higher close to confirm that bullish divergence, but you can see around late February, we got extremely oversold on the RSI, it's a momentum indicator. We popped. And now we're putting in a higher low as priced it is putting in a lower low. So once we turn, we could see a big rally here to the upside.

If we move to the next chart, we can see-- this is a weekly chart of the S&P 500. 2011, 2015, and 2016, 2018, we all held the dark blue line, which is just simply the 200-week moving average. This time, we have cut right through that. They have been great buying opportunities during this bull market. But eventually, it was doomed to fail.

And the other negative here about this chart is we have cut through the trend line support off that 2,000 low, and I call that my bull market trend line. So you know, the long-term trend here has turned very, very quickly. If we move to the next slide, I have a couple breadth slides, market breadth.

The first is the NYSE common-stock-only AD line. That's on the second panel. And then on the last panel, we have the AD line of the S&P 500. And because the decline has been so fast-- usually tops take time, you know, months and months and then they roll over as, you know, there's a lot of distribution and internal weakness. But this has happened so quickly and rapidly that the AD lines are still in their, you know, major bull market up trends. So that's the good news about breadth.

If we go to the next slide, the bad news about breadth is-- this is a weekly chart of the S&P 500, and it shows the percent of stocks above their 200-day moving average. So it basically says, you know, what's the percentage of stocks that are on uptrends versus downtrends? This data goes back to 2004.

The key takeaway is that the equity markets usually need to break down internally before any major correction or bear market takes place. During this decline, price and internal breakdowns have become-- have been coincident. We are in a danger zone below 45%, where major stock market damage has occurred. We're only down to 12%, which about matches the lows that we saw back in 2011. So the majority of stocks in the S&P 500 are in downtrends, and that's certainly a bearish breadth sign.

Now, I have two charts-- moving to the next. I have two charts on sentiment. The first one is just a simple five-day moving average of the CVOE equity-only put/call ratio. Anything below 0.57 on the chart shows a lot of call buying versus put buying, and that's an area where option investors, you know, are showing a lot of complacency, as well as a lot of bullishness. Above 0.80, we're seeing a lot of puts versus calls.

So from about the middle of November-- this has been very strange-- about the middle of November, we started getting very complacent readings in this put-call measure, below 0.57. And then as the rally continued off the October lows, into February, I think this is a record low here for this particular put/call, as people were very, very bullish here, into the new year, into January and February.

Because the decline has been so sharp, though, we have completely reversed that complacency, and this can be seen in most of the sentiment indicators I look at. The five-day has soared. My updated chart, as of Friday, shows the five-day is up at 1.03. And this is actually higher than the fear we saw during the 2008, 2009 financial crisis.

The next chart is the National Association of Active Investors-- Active Investment Managers exposure index. It shows how much money they have in the stock market. This reading goes from zero, and it can go above 100% when managers are using margin. Over 90%, that's considered a very high exposure and a warning that these managers are too bullish.

And underneath about 35%, we see that active investors are pretty bearish, with very, very low exposure. We're down around 16%. Three weeks ago, we were above-- we were up around 87%, 88%, So this has just fallen off a cliff as well. So sentiment is washed out, extremely bearish, and at levels that we've seen market bottoms in the past. But I could have said that last week and maybe the week before.

So the last-- we're moving to the last chart. This is the treasury yield on 10-year basis. The momentum indicator, the 14-day RSI, went to the lowest reading ever. That's due to the precipitous, parabolic decline that we saw in yields, down to about 0.4%. We have bounced back quite a bit from that level. But people panicked out of the stock market, and they panic into bonds. So this is basically another sentiment read, if you will.

So we're certainly seeing, you know, a complete washout market breadth, a complete reversal in market sentiment, but it's up to price to indicate to us that the end is here. And we're just getting no indication of that just yet. And on that, I'll send it back to Steve.

STEVE BIGGAR: OK, thanks, Mark. We'll go a bit out of order here and try to get back to John to give an update on the economy and the markets. John, do you want to step in?

JOHN EADE: Sure, Steve. And we'll go back to the second slide on the economic outlook. So we started the year expecting slower economic growth in 2020 than we got in 2019. And a few weeks ago, we lowered our outlook further, based on the initial impact of the coronavirus. And then our Market Watch Report this morning, which is available on Yahoo Premium, we lowered our economic outlook again and are now forecasting a recession for the second and third quarters of 2020.

We actually think the recession-- and there's a group of people who decide when the recession actually begins-- they'll probably peg it in March this month when everything shut down. But our forecasts are-- actually call for a modest increase in GDP growth for what we did get in January and February and then negative numbers in the second quarter and third quarter and then positive growth in the fourth quarter.

And there were four main reasons why we lowered our GDP forecast to call for a recession, and I'll go through them real quickly. One is, you know, what's happened in the energy industry, with oil prices down almost 50% for the year. While that's good news for the consumers, they don't have to spend as much on gas, the energy sector has been a big engine for hiring the past few years. And also, there's been a lot of capital investment into oil rigs, into energy equipment, and we're just not going to see that with oil prices down this low. So that's one factor.

A second factor, and this is affecting everybody, all of these canceled events-- dinners, tournaments, golf events, concerts. This is hitting everybody. It's hitting the consumer spending on services, on airlines, hotels, restaurants. So that's going to take a hit on the overall economy.

The third is what we expect-- we expect to see a downturn in the export sector. This is a global phenomenon, obviously started in China. And China's economy slumped in the first quarter and looks like it actually contracted. Japan's economy declined 6% in the most recent quarter. Europe looked like they were going to barely avoid a recession before the coronavirus, and now they're not. So the exporters are not going to be contributing to GDP growth.

And this bear market in stocks, not to mention all the canceled events and lifestyle changes, are going to clobber consumer confidence and consumer spending. Again, we haven't yet seen that in the economic numbers. The recent sentiment readings were high, but those were for February, and everything changed in March.

So those are the four factors leading us to expect an economic downturn, and that's clearly what the market is anticipating. So what does a recession look like? Most of us remember the 2008, 2009 recession, which was a doozy, but they aren't all like that. There have been 11 recessions since World War II. And on average, they have lasted 11 months, less than a year. The 2008, 2009 recession lasted 19 months, and it was just about the deepest that we'd experienced.

We don't think this current expansion is going to be so deep. There are four factors here. Again, let me note that, you know, these outlooks could change. But the first factor why we don't think it's going to be so deep is that consumer spending on non-durables-- all the hand sanitizer, aspirin, and paper products-- is going to be strong. Investment into intellectual property and products had been strong heading into this weakness-- software, Netflix, Facebook-- and we expect it to still be a key factor helping to prop up the economy.

Government spending is almost certain to be strong. Recall in 2008, 2009, the government took many steps to break the economic fall and reignite demand. There was the Cash for Clunkers program. There was more deposit insurance, the TARP program for banks, bailouts of the auto and insurance industry, as well as rate cuts and QE programs. Now, we're early in this cycle, right? If the economy started in March, well, we're still in March. We've already had rate cuts and QE.

We certainly look for fiscal stimulus in some form of rescue for energy and airline industries. That's being debated right now among the White House and Congress. Will these programs be controversial? Certainly, they will be. Will they work? They have in the past, and government spending, we expect to be a key contributor to economic growth. And going back to our earlier point, the economy was in pretty good shape prior to the virus. Unemployment was low. Interest rates were low. The consumer's balance sheet was sound.

Of course, the one wild card is, you know, all of our ability to contain the spread of this virus. We're taking drastic steps in the US now. China took drastic steps a few months ago and appears to have dramatically slowed the spread of the virus, so that's a big, hopeful sign.

As for stocks in a recession, well, they certainly go down ahead of a recession. That's a familiar pattern. We have seen, though, that during those 11 recessions, stock prices have, on average, been flat during the recession with a median gain of 5%. And in more than half of the recessions, stock prices rose. Back in the 2008, 2009 recession, that recession wasn't over until June, and stocks took off in March. So stocks anticipate a recovery in the same way they anticipate a recession.

We've been working with our valuation model to understand the impact of these market gyrations. Our model takes into account interest rates, prices, GDP, earnings growth, and signals whether stocks or bonds are the better value. From 2009 to 2019, stocks provided a discount and were the better value, but they peaked above fair value early in 2020. You know, Mark showed you some of the exuberance in the market at that time. But now, with the sell-off in stocks and the rally in bonds, we are back at a 15% discount for stocks, assuming earnings are pulling back 10% to 15% this year. That doesn't mean they won't go lower, but the outlook is, you know, brightening down the road, based on lower equity valuations. And Steve, I'll turn it back to you.

STEVE BIGGAR: OK, thanks a lot, John. Very good. Let's skip ahead, then. We'll go to Joe. Joe, now technology overall was obviously a big winner last year but has not been spared from this recent downturn. So what are you thinking about-- for the software space that you cover and also the telecom industry?

JOE BONNER: Thank you, Steven. Good afternoon. You know, while any company might be subject to the general economic impact of the coronavirus, I'm going to talk today particularly-- some particular issues applying to software technology and telecom. You know, one of the three-- of the three big tech software companies that I cover, you know, Microsoft may have relatively the most exposure here.

You know, the company came out with a warning that it would not meet its revenue guidance range or its more personal computing segment, due to the interruption in the hardware supply chain of Windows OEM computers and its own software devices. This was, obviously, due to the extended closure of Chinese factories. We-- you know, we modestly lowered our own estimates for Microsoft. While our Chinese factories, you know, may be coming back online, the more personal computing segment, at about 1/3 of revenue and operating profit, is the consumer-facing division of the company and could suffer from a downturn in consumer sentiment.

Alphabet, Google, and Facebook have less direct exposure to China, since both Google and Facebook are banned there. For Alphabet and Facebook, the effect could be more of a second order, overall coronavirus economic impact, as both companies are critically dependent on advertising. While there has been a multi-year secular trend of advertising dollars following the eyeballs to the internet, and with those advertising dollars going mostly to Google and Facebook, the demand for advertising is fundamentally related to economic and business activity, since the coronavirus pandemic may now be undermining. The underlying advertising revenue base has been growing just fine with Facebook, reporting 25% growth and Google 17% growth in the most recent quarter.

Now I'd like to talk about the explosion of the US telecoms. I emphasize US since, you know, one positive here is that all of the-- so many of these based telecoms-- Verizon, AT&T, and the almost-merged T-Mobile, Sprint-- do business almost exclusively in the US, though AT&T does have some South American assets. On the demand side, it's somewhat of a double-edged sword, since, like all other companies, telecoms would be impacted by declines in overall business activity. Though they may also benefit from the increased need for remote connectivity, both wired and wireless.

None of the carriers are reporting a spike in traffic just yet, though with the tens of billions of these companies-- that these companies have spent on their wireless and broadband networks over the years, we are expecting resilience. Verizon, just last week, increased its 2020 cap-ex budget by $500 million to a new range of $17.5 to $18 billion.

Looking at the telecom supply side, the issue here would be supply chain. While the US was already moving away from Chinese network equipment suppliers, particularly industry leader Huawei due to concerns about security and intellectual property theft, the real issue for the telecoms will be wireless handsets. The industry has been preparing for a 5G iPhone upgrade supercycle with the past-- with the first 5G iPhone expected in September.

However, given the prolonged Chinese industrial shutdown and a general global economic slowdown, we may not know for some time whether this launch will actually happen. Industry tracker IDC had projected the high-end smartphone shipments will drop 15% in 2020, and that was before coronavirus really hit the US. We've talked about 5G hype before. You know, a lack of handsets would be a factor in pushing the real impact of 5G further into 2021.

Now, turning to software technology generally, we don't expect the coronavirus to overcome the powerful secular trends for digital transformation of the enterprise. These include cloud and hybrid data center, cloud intelligent edge computing, essentially moving-- power the cloud out closer to the enterprise end points to improve customer engagement and service-- artificial intelligence, making enterprise computing more intelligent, again, improving engagement while lowering costs of ownership, and AR/VR, which is just beginning to discover enterprise use cases. These technologies make enterprises both more efficient and more responsive to customers. Next slide, please.

OK, you know, I just have a couple of picks here. Activision Blizzard, that's my stay-at-home pick. The video game industry is filled with a number of one-hit-wonders, but Activision is one of the few game videogame distributors that has cultivated a persistent-- a consistent portfolio of hit games. It doesn't hurt that the company has the blockbuster Call of Duty franchise, typically the number one selling video game globally almost every year.

The company has worked to extend and deepen player engagement with its games by digitally delivering new and expanded content over time after initial launch. It's also expanded in the growing field of casual and mobile gaming. With it, digital entertainment and acquisition. And also with it-- with its King Digital Entertainment acquisition-- you know, King is the-- is the-- known for its popular Candy Crush Saga, among other games. I'm not taking the subway anymore to get to work, since I'm working from home. But I could generally say, you know, when I was on the subway, there was almost every day that I could see somebody playing Candy Crush Saga. Activision is also expanding into new revenue streams, including e-sports and e-sports broadcasting and consumer products.

The second pick would be ServiceNow. You know, ServiceNow is probably one of those companies that have flown under most investors' radar because its a business that tends to be behind the scenes and may not be easy for most investors to understand. However, ServiceNow is also benefiting from exactly those powerful secular forces toward enterprise digital transformation that I spoke about earlier, things like cloud and big data, mobile and data security. So ServiceNow is an enterprise software company that offers tools in the areas of IT service management, IT operations management, and IT asset management.

The company's value proposition is to automate enterprise workflows, thereby boosting productivity and lowering total cost of IT systems ownership, essentially enabling digital transformation of the enterprise. The company is expanding and a lot of directions, you know, new AI-based products, just made a couple of tuck-in acquisitions in that space, in the new industry verticals, including government agencies-- they got FedRAMP certification-- and, of course, international expansion. With that, I'll turn it back to Steve.

STEVE BIGGAR: OK, thank you, Joe. Appreciate that. Let's go onto David Toung now. So clearly, healthcare is on the frontlines, in terms of fighting the coronavirus. So what are your thoughts here on the sector, David, and who do you think is positioned well?

DAVID TOUNG: Steven, thank you for the introduction. Yeah, this is David Toung, senior healthcare analyst at Argus. Certainly, the healthcare sector stocks have been hit really hard. We're seeing 20% or more off the peaks. There are some high-quality names that we want to focus on here. You know, these are companies that have done very well, and their valuations have just been a lot more attractive.

But I do want to make a couple of points that, you know, certainly there's a lot of disruption in the industry. There'll be deferral of elective surgeries, as hospitals focus their efforts on treating coronavirus patients. You know, we're talking about ICUs. They're getting close to full capacity. At the same time, there are companies that are developing either drugs to combat the coronavirus or developing diagnostic tests. And you know, we want to highlight those stocks.

To start off, I want to talk about Merck. Merck is a very high-quality, longtime name in the pharmaceutical industry. They've had a lot of growth from oncology drug Keytruda. And I talk about Keytruda because people are going to continue to get oncology treatment through these disruptions. I mean, you're not going to stop your treatment if you have lung cancer or you have other-- and Keytruda has been a tremendous drug that treats-- it's got leading share in small-cell lung-- non-small cell lung cancer, which is the largest segment of lung cancer. And lung cancer itself is a very large incidence within cancer.

And Keytruda also treats other tumor cancers. It's been-- it's a very successful launch, and it continues grow. In some parts of the world, sales have gone up more than 50%. So I think that Merck is a lot more attractive today than it was, you know, four weeks ago, eight weeks ago. So you know, it's something to keep in mind.

Now I want to talk about chemical Danaher, which is a very large-- it has its tentacles in many, many parts of healthcare. But within Danaher, there's a unit called IDT. It's called DNA-- integrated DNA technologies. And what IDT is doing is that they've developed a key component for the test kits that are needed to diagnose and detect the coronavirus, and it has the ability to scale up so that it can supply millions and millions of these test kit components very soon. Right now, it's been able to ship over a million.

Also, IDT has the technology that's very, very useful and developed in assisting the drug makers are developing a vaccine. You know, they're looking at the DNA sequencing, and they can really help with drug development. So Danaher, as I said, which owns IDT, is another stock that's come down in value. It's a lot more attractive now.

The third stock I want to talk about is Thermo Fisher, stock ticker symbol TMO. And TMO is actually producing the test kits that will detect the coronavirus, and it's distributing the test kits to commercial labs. This morning, the company announced that it was granted emergency use authorization by the FDA. So it can, you know, officially distribute these test kits. It has-- already, it's-- already shipped 1.5 million test kits. And you know, by next week, it should be able to ship 2 million test kits.

The-- Thermo also provides a lot of instruments and reagents and consumables to developers of drug-makers, including the ones that are trying to develop a vaccine. So you know, they're in the R&D part of drug development. So it's another stock that, you know, I think we should focus on in these times.

The fourth company I want to talk about is Charles River Labs, although they are not a direct tie-in into the coronavirus, either developing a vaccine or the test. But what I like about Charles River is that they do a lot of work in the preclinical stage of drug development and just a lot more money that's going into drug development, particularly in what's called cell therapy. Charles River recently acquired a company called HemaCare, which processes the blood-- separates out the different blood components that's used in cell therapy. So we think CRL is very well positioned in the continued spending on drug development.

I also want to mention Gilead Science, which is a hold-rated stock. Of the prior stock I mentioned were buy rated. And the reason why I mentioned Gilead is because Gilead is in this position of really being the closest to a drug that could possibly work to treat the coronavirus. The company repurposed Remdesivir to fight COVID-19. Remdesivir was developed to treat other drugs, like H1N1 and Ebola. And you know, because there are similarities in the DNA pattern of these viruses, Remdesivir was repurposed. Remdesivir right now is in five clinical trials around the world-- two in China, two in the US, and one other overseas.

The drug is also in a compassionate use, where they're-- essentially, they're given to patients outside of the clinical trials. There were 14 patients who came off the cruise ship, and they were pretty sick. And they were all given Remdesivir. And the evidence is that about half the people have recovered, and two of them are still quite ill. But all of them are alive. They all received Remdesivir.

So it's very promising. It has not been approved yet. It has not-- you know, it has not passed the efficacy test, but it does look very promising. So you know, there's been a lot of attention on Gilead, on Remdesivir, so I did want to mention that. And with that, let me turn back to you, Steve.

STEVE BIGGAR: OK, thanks, David. So John, for those out there that are looking for-- you know, a lot of stocks have gone on sale here. What would you say for those looking to pick up some high-quality names?

JOHN EADE: Well, Steve, we cover about 500 companies, our analysts with buy, hold, and sell ratings. And we also have financial strength ratings where we're going through the balance sheet and cash flow generation capabilities of these companies. And we ran a screen the other day of stocks that are down sharply, and the screen is here on the presentation deck. These are all stocks that are on our Argus buy list. All have high financial strength rankings-- high or medium high, so clean balance sheets-- and have fallen sharply, along with the market, from their 52-week highs.

And Steve, you'll see that, you know, the bears aren't focused on just one sector. We have certainly a lot in technology, but there are, you know, bargain stocks in the financial sector, industrials, and among the consumers as well. So you know, our analysts know these companies. They've estimated earnings. They know the quality of the earnings, the quality of the balance sheets. They write up these companies several times a year, analyzing the estimates.

And Steve, I think what you have here is a good list of quality stocks that are on sale now. Now, that's not to say that, you know, Mark would say the technical picture is perfect for buying these. But you know, if they're already in your portfolio and you've got some cash that you are looking to redeploy in the market when stock prices were down, you know, it may be worth adding a little bit here and then, you know, maybe another month or two months down the road. And this is a good list to start looking at.

STEVE BIGGAR: All right, thanks, John. We'll leave this list up for now. So why don't we turn to questions? We do have some questions from the audience. And John, I'll stick with you. One question is that is now the right time to enter the market? Now, it looks like today, we're going to close down 11% or-- 10% or 11%. You know, and how long do you think-- if so, how long it'll take the market to recover? And maybe Mark, you can chime in as well.

JOHN EADE: Well, so Steve, we talked about that a little bit earlier where, you know, the market is ahead of the economy going into a recession, and it will be ahead of the economy coming out of a bear market and back into a bull market. The stock-- the bull market of 2007, 2009 ended in March. The bear market-- I'm sorry, the bear market ended. The bull market started, and that was three months before the recession ended. You know, we're calling for a relatively short recession here. Maybe it's over by the end of the summer. If that's the case, then the stock market will probably be on its way up by then.

I talked also about our valuation model. And right now, the valuations are well below normal. They're about one and a half standard deviations below normal. But just as an example, during the 2008, 2009 bear market, the valuations fell to three standard deviations below normal. So-- and that's as low as we'd ever seen it. So there still is room to fall. We don't know what the impact of earnings is going to be. We'll know more about that when we start to get the first quarter earnings reports in the middle of next month.

I guess if there's one data point that everybody is going to be watching, it's going to be, you know, that curve. When do the cases start to flatten and start to decline? I think that's going to-- that that data point is going to be a very positive one for a return to normalcy in the economy and in the markets. So maybe we'll be looking for that, Steve.

STEVE BIGGAR: That certainly will be huge. OK, thanks, John. Mark, I guess maybe a-- a similar question, from a bottoming perspective. So you know, and you mentioned some of these, a lot of the support zones technically have failed in this latest downturn. So at what point will you be looking for the-- you know, to suggest that the market has bottomed here? Is there, you know, a one or a few key things that you're looking for?

MARK ARBETER: Yeah, sure, Steve. Sentiment and breadth, you know, as I said, are washed out and, you know, kind of signaling that, you know, the worst could be over. But as I said, we could have said that last week or the week before. So what I'm looking for is some stabilization in price action. What we need is a few 80%, 90% upside days, where 80% or 90% of the issues on the S&P or the NYSE rise and the volume going into those stocks is upside volume versus downside volume. And we don't want to see anymore 80%, 90% down days, which we've seen quite a bit, of late.

We need to see some type of reversal pattern develop, typically major intermediate to long-term bottoms or either a double bottom, an inverse head-and-shoulders bottom, or an ABC bottom. Certainly, we're too early for any kind of bottoming action just yet. And then once we have that pattern or formation in, you know, we need to break out from that bottoming formation to confirm that a bottom is in.

We've absolutely seen panic in many of the indicators, some of which I went through. I'd like to see the percentage of stocks above their 200-day average get back above that 45%, 50% area. We're down at 12% now, so there's been a huge amount of longer-term damage to most stocks, I would say. The S&P 500 buying percent index, or BPI, shows only 3% of the index on point and figure buy signals. This needs to improve and get back to about 50% or 60%.

An accumulative NYSE new 52-week highs minus 52-week lows busted through its 50-day average back on March 6. That needs to be rectified. And one other thing, that McClellan Oscillator, which is a breadth indicator-- this was as of Friday-- was very oversold near negative 800, and a recovery back to plus 800 would be a nice, intermediate-term buy single. So those are the things I'm looking at.

You know, from a risk-reward standpoint, you know, I keep thinking this is a very good time to be putting money to work. But you know, unfortunately, I said that last week or the week before. So it's up to price, you know, to let us know that the trend has turned.

STEVE BIGGAR: OK, thanks, Mark. And I should point out as well that all of your write-ups are available on Yahoo Finance Premium under Research Reports and then filter by technical analysis, and you'll see Mark's commentary there. So the next question is regarding some of the views on our sectors-- John, maybe best for you-- is, you know, the idea of energy, which has really sold off hard, is at a bargain here. And are there any areas where you just would not go for the foreseeable future?

MARK ARBETER: Steve, yeah, I guess energy, financial, and consumer have really borne the brunt, as well as technology. But as we saw earlier, really nothing has been unscathed. You know, financials, I think, are in a better position here. The banks are-- have higher credit quality and better balance sheets than they did in the previous financial-- previous crisis, which is more financially related. So I would, you know, look to bottom fish, I think, in the financials before I would in, you know, the consumers.

I think there's going to be some bailouts in certain sectors of the consumer-- you know, the airlines are probably going to get something, maybe something for the cruise ships, too. But that's going to be fought out for a while among the different sides. And in energy, you've got the Russians and the Saudi Arabians fighting over the price of oil. You've got oil now, you know, below the $40 breakeven level for the Permian Basin. You've got forecasts of peak oil as early as 2030, you know, certainly probably by 2050.

So you've got an industry that is, you know, getting ready to go out of business. And I know the stocks are on sale here. You know, one that some of our portfolio friends have had-- like Schlumberger, in portfolios a long time-- I just don't see any point in trying to scoop up bargains in energy here. I would stay away from energy. I would hesitate in consumer discretionary. But if I were going to go bottom fishing, I think I would look for, you know, some bargains in the financial sector here.

STEVE BIGGAR: OK, thank you, John. Question for David regarding hospitals and medical device stocks, so the CDC now has recommended that hospitals postpone elective surgeries in order to preserve hospital beds for COVID-19 patients. So what impact do you think that's going to have on that space?

DAVID TOUNG: Well, you know, with procedural volume likely to be down in the first quarter and into the second quarter, I think you're going to see a hit to the volume for these medical device stocks, like Medtronic or Stryker, Zimmer. You know, a lot of their products are used in elective surgeries, rather than surgeries where, like, people who are in accidents that are, you know, very urgent. But it's likely that these procedures will be pushed out into later this year because people who need a knee replacement, you know, you can't put off immobility. You can't put off the pain. So it's likely that the volume will be deferred, delayed.

And so I don't see any permanent damage to the device sector, but I-- you know, I want to point out that, you know, you're going to see, you know, some dips in volume and impact on revenue and earnings. You know, when we first saw this coronavirus, we thought the impact was in China. Now we see that, you know, it's going to impact the US and Europe where, you know, hospitals have to triage their beds for the coronavirus patient.

STEVE BIGGAR: Very good. Thank you, David. Joe, actually one for you, so any risk to the telecoms from a business slowdown in the US? Of course, these are usually, you know, pretty safe companies, good yields and all that. So any risk that you see on that side?

JOE BONNER: Yes, Steve. So let's-- it's really two stocks we're talking about here, AT&T and Verizon. They are the business telecom companies. Let's put it that way. And the short answer here is that the revenue at risk here would be-- for each one, it's around 20% is their business-oriented revenue. You know, and again, it's kind of a two-edged kind of thing here is that, you know, obviously, people are working from home more. Connectivity is more critical.

So you know, there's that. I mean, the-- none of the companies have really seen a spike in usage yet. I mean, I guess we need more time. But as I said, these networks are pretty resilient. So just in terms of some context here, you know, their-- these companies' business revenue has-- you know, from the wire line-- you know, wireless substitution, you know, united protocol substitution, you know, these businesses have been very slow growth for a number of years, you know, plus or minus 1%, basically static. So you know, they've become a relatively small part of revenue. And so yes, a negative, but probably not a definitive negative is what I would say.

STEVE BIGGAR: OK, thanks Joe. Well, we're coming up on the other top of the hour, so we'll go ahead and conclude. I'd like to thank all of our speakers and a big thank you to all of the Yahoo Finance Premium subscribers that joined us today. That concludes our webinar for this afternoon, and we hope you have a good day.