A Pause Before the Fed Statement?

Markets gapped higher and, despite a little morning profit-taking, rose steadily all day with a close very near the highs.  The bulls seem very optimistic about reopening and economic recovery.  On the day, SPY gained 1.21%, DIA gained 1.75%, and QQQ gained 0.78% (to another all-time high).  Interestingly, the VXX also gained slightly to 29.82, and T2122 also squeezed-out another gain to 99.57.  The 10-year bond yield fell a bit to 0.879% and Oil (WTI) also stepped back to $38.23/barrel. 

At the end of the day, it was announced that the Fed is expanding its “Main Street” program allowing for both larger and smaller loans as well as increasing the repayment term to 5 years on loans.  This news came as it was also confirmed that the US had entered a recession in February, as the economy led the government by a month in recognizing the importance of the pandemic.

On the Virus front itself, the global headline numbers are 7,219,187 confirmed cases and 409,108 deaths.  The world saw a record number of new cases in a day, with over 136,000 reported Sunday.  In Israel, they have stopped reopening as they have seen a doubling of the new case rate in the last week coupled with a steep increase in deaths.   However, the situation in places like Canada is improving, allowing them to ease border restrictions with the US, though still requiring a 14-day quarantine for incoming travelers.

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In the US, we now have 2,026,597 confirmed cases and 113,061 deaths reported to date.  FL and TX both reported big jumps in new cases this last week (46% and 50%).  However, at least in FL, there was also an increase in testing which may help explain it away.  However, in TX it is an increase in positive tests (up to over 7.5% of tests done in the state coming back positive) that is the cause.  This resulted in a record number of hospitalizations in the state.  Still, we are not seeing a medical system overload at this point as the state has 1,600 open ICU beds and over 5,800 ventilators available.

Overnight, Asian markets were mixed with China, Hong Kong, Australia, and South Korea higher.  However, Japan, India, Singapore, and Thailand led the others lower.   European stocks are lower across the board so far today.  At 7:30 am, US futures are also lower, pointing to a gap down of about one percent in the large caps and half a percent in the NASDAQ.  

The only major economic news for Tuesday is April JOLTs (10 am).  Earnings reports are also lite with BF.B, CONN, GCO, HDS, SIG, and TIF reporting before the open.  Then AMC, CHWY, FIVE, GME, and VRNT report after the close.

The bulls have been running rampant, but futures are telling us that traders are taking some profits this morning.  With no economic news on tap to stir the pot and waiting on the Fed statement Wednesday, markets may drift today.  Don’t bet against the trend unless you’re doing it to hedge, but remember we are well overdue for a pause or pullback in this swing.  So, stay focused on the short-term chart and lock in those profits as you go.  Above all, don’t chase or predict.

Ed

Trade ideas for your watchlist and consideration: OGI, VFF, AGS, TLRY, ZS, SMSI, NKE, HD, SQ, PTE, ASNA. Trade your plan, take profits along the way, and smart. Also, don't forget to check for upcoming earnings. Finally, remember that the stocks/ETFs we mention and talk about in the trading room are not recommendations to buy or sell.

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🎯 Friday 6/21/19  (10:09 am) Aaron B: Today, my account is at +190% since January. Thanks, RWO HRC Flash Malcolm Thomas Steve Ed Bob S Bob C Mike P and everyone that contributes every day. I love our job.

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