Markets opened flat Wednesday and after a slight rally, sold off all morning before a range-bound roller-coaster near the lows all afternoon. The result is a Bull Flag pattern in all the major averages. On the day, QQQ was down 0.84%, SPY down 0.63%, and DIA down 0.56%. The VXX fell a percent to 21.92 and T2122 fell outside the overbought territory to 72.50. 10-year bond yields were unchanged at 0.727% and Oil (WTI) rallied over 2% to $41.11/barrel.
On the stimulus front, Treasury Sec. Mnuchin and House Speaker Pelosi spoke again Wednesday but did not reach a deal. Mnuchin threw cold water on the market with comments after the meeting to the effect that getting a deal done before the election will be very difficult. However, they will meet again Thursday.
After the close, WFC announced they have fired more than 100 employees for abuse of the relief fund programs. However, they stressed a lower than expected loan loss for the quarter. UAL also posted a larger than expected loss on the quarter and again stressed the need for relief from the US government.
France said Wednesday that they intend to proceed with a tax on digital transactions with customers located in their country. The French Finance Minister also said the EU should press ahead with its own plans for an EU-wide digital tax (to prohibit the big tech companies from shifting profits to low-tax Ireland in order to avoid taxation). US sanctions and tariffs on France are scheduled to take place in retaliation as of January.
On the virus front, in the US the numbers showing we now have 8,153,740 confirmed cases and 221,872 deaths. After almost 60,000 new cases Wednesday, the 7-day average daily new case count rose again to 53,151/day, while the lagging average of deaths remains relatively flat at 723/day. 36 states are reporting increasing new case numbers and the country as a whole has seen a 14% increase in cases in the last week.
Globally, the numbers rose to 38,814,533 confirmed cases and the confirmed deaths are now at 1,098,012 deaths. In France, new restrictions (including 9pm curfews) were announced as both new cases and hospitalization reached the highest level since June and exceeded their preset threshold for additional measures. Both Germany and Italy recorded their highest number of new cases since the start of the pandemic and Russia recorded a record number of deaths Wednesday. Meanwhile, in Spain, all bars and restaurants in the Catalonia region have been closed again for at least 2 weeks. Across the Channel, in a controversial move, Wales has banned incoming travelers from high-risk areas of the UK, including Scotland, Northern England, and Northern Ireland.
Overnight, Asian markets were red across the board (with the lone exception of a modestly positive Australia). Hong Kong and India were the only losses of more than 2%. In Europe, markets are following Asia with major losses at this point in the day. The big 3 bourses are showing the FTSE -1.88%, DAX -2.72%, and CAC -2.15% on renewed virus and shutdown fears. There is a similar scorecard across the rest of the continent’s exchanges. As of 7:30am, US futures are also pointing to a significant gap down. The DIA and SPY are both implying about a 1% gap lower, while the QQQ is showing a 1.40% gap down at this point.
The major economic news for Thursday includes Sept. Import/Exports, Weekly Initial Jobless Claims, NY Empire Mfg. Index, and Philly Fed Mfg. Index (all at 8:30 am), Crude Oil Inventories (11 am) and 3 Fed speakers (Kaplan at 11 am, Quarles at 11 am, and Kashkari at 5 pm). Major Earnings Reports include CMC, MS, SCHW, TFC, TSM, and WBA before the open as well as ISRG after the close.
The surging virus, lack of a stimulus deal, and earnings reports are likely to be the main drivers of the market. However, the flurry of economic news at 8:30 am may have something to say about the open. Regardless of the open, political overhang and stimulus posturing are sure to add to volatility during the day. So, be careful if you are going to wade into this market anew.
Be nimble and make sure you lock-in profits whenever you can. As always, maintain your discipline. Stick to those rules and don’t chase moves you have missed. Follow the trend (and the short-term trend is down in a longer Bull trend doing a Flag pattern move now). Just stick to those trading plans and they will serve you well.
Swing Trade Ideas for your consideration and watchlist: No trade ideas today. However, the public is invited to join Rick in the trading room starting at 9 am (where many trade ideas will be discussed) using this link: https://bit.ly/Hrcopenroom Trade your plan, take profits along the way, and smart. Also, remember to check for impending earnings reports. Finally, remember that any tickers we mention and talk about in the trading room are not recommendations to buy or sell.
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