The S&P 500 is up 10.5% year-to-date. The Nasdaq is up over 30%. If we can finish anywhere near today’s close – it will be considered a solid year – despite a 35% bump-in-the-road over March. So here’s today’s exam question: Will the market be higher or lower as we close out the final two months?
The market received some potentially very exciting (and long awaited) news today…
An effective vaccine for COVID-19 could be on the horizon.
Pfizer (PFE) lit up the market with news of its Phase III vaccine trial… where initial studies showed “90% effective” rate.
Yesterday I suggested we’re likely to find resistance in an important zone… and today that’s what happened… price action stalled. Despite the “blue-wave reversal” trade this week – we remain largely range-bound. For eg: stocks are still trading where they were during July and August – albeit at the top of the range
The “gridlock rally” continued at great velocity today…
We’re now up 10% in just 4-days… more on this shortly when I explain why we are headed for resistance.
Now “gridlock’ is how the market describes a likely Biden White House; combined with a Republican controlled Senate
As explained yesterday – this is a welcomed result for the stock market.
Whilst Biden has several pathways to achieve the magic number of 270 (he’s on 264 at the time of writing) – markets have priced in a Biden Presidential victory.
But it won’t be the “blue wave” most poll predicted… so what does that mean for stocks, bonds and the US dollar?
2020 will be remembered as a very difficult year for both traders and investors.
No two ways about it.
For example, it’s not often we see the market crash 35% in less than 3 weeks… only to then rally 50%+ in just a few months.
Therefore, how does one (a) limit the damage prior to the crash; and also (b) have the conviction to buy the upswing early?
That’s hard.
When we see the Dow Jones Industrial Average lose just under 1,000 points or ~3.5% in a day – it should not be surprising. If anything – it’s expected. For several weeks I have shared my thoughts on the technical warnings and macro risks… these are now coming into sharper focus.
Last week I warned of some near-term selling pressure… and today markets saw a hint of that.
I referenced the loss of momentum on the weekly-MACD — often an early warning sign of prices easing.
I also cited possible over-head resistance at a key Fibonacci retracement zone…
Markets stalled this week as Congress sent some mixed signals on the timing of any new fiscal relief.
My (consistent) take – don’t expect a deal this side of Nov 3rd.
This week approximately 170 S&P 500 companies will report their Q3 earnings. From mine, the earnings bar remains low therefore expect a lot of earnings “beats”.
It’s that time of year folks…. earnings season! Financial titans kick things off tomorrow w/ JPM and Citi.
Will they post record trading results again with near zero rates?
If the price action in JP Morgan is any indication (my favourite US bank to own) – the last four weeks has seen the stock move from $90 to $102 (up over 10%)
