For nearly a month now, the market environment has dramatically changed. The S&P 500 (SPY  ) is down more than 100 points from its peak as volatility has soared. Through this decline, there have been some bounce attempts that have been sold into. In fact, any bounces were met with immediate selling often it was overnight so that stocks opened below the previous day's lows, ensuring that anyone who bought was immediately underwater.

Weak Bounces

These bounces also featured strength in defensive sectors like utilities or consumer staples. Stocks that are most vulnerable to the effects of the coronavirus shutdown like restaurants or travel continued to underperform. In a true relief rally, oversold, beaten-down stocks should also participate.

However, this week's price action has been showing more constructive signs despite prices continuing to trend lower. The intraday bounces have been on volume and certain stocks like Walmart (WMT  ), Kroger (KR  ), and Costco (COST  ) have been making new highs. Additionally, the S&P 500 has found support between 2,350 and 2,400 by bouncing off these levels three times. This at least creates a level of support and resistance for short-term traders that didn't exist during the bulk of this waterfall decline.

Green Shoots

There are some other 'green shoots' as well. A month ago, markets were pretty complacent about these risks. Now, many are openly talking about the shutdown going on for up to 18 months. However, countries that have instituted shutdowns are seeing progress in terms of slowing the rate of new cases.

Italy has been shut down for nearly two weeks and is now seeing the number of new cases flatline which indicates that the policy has been successful. This is also evident in other European countries and Asian countries. Countries like South Korea and China are slowly returning to normal operations. There are concerns that the virus could resume its outbreak with normalization but these countries have maintained rigorous testing.

Another positive is that long-term interest rates are low but rising. In fact, nearly every S&P 500 stock's yield is above the 2-year Treasury yield. If and when conditions normalize, this will result in healthier consumer balance sheets, strong housing demand, and demand for all types of financial assets. Finally, the executive branch and Congress finally seem to be wrapping their heads around the fact that trillions of dollars of stimulus are needed. And that acting fast and aggressively will be the cheapest and prudent thing to do in the long-term.