Markets gapped higher at the open and ran higher the first hour Friday on better than expected Sept. Retail Sales. However, a mid-morning selloff led to a sideways grind that lasted until 3pm, when the floor fell out from underneath the indices. That late-day selling left all 3 major indices with higher wicks and ugly black candles (although the DIA managed to remain a Gravestone Doji). On the day, SPY ended down 0.06%, QQQ down 0.55%, and DIA up 0.33%. The VXX was flat at 22.27 and T2122 remains just inside the overbought territory at 81.48. 10-year bond yields rose to 0.749% and Oil (WTI) fell slightly to $40.78/barrel.
On the stimulus front, on Friday House Speaker Pelosi told other Democratic leaders that the 2 sides remain far apart on several issues. These are funding for state/local governments, tax breaks for working families, child care funding, and the liability waiver that Republicans want for businesses. Meanwhile, Senate Majority Leader McConnell insists the two sides are negotiating at 4 times the level the Senate GOP will accept and on Saturday said he’s proceeding with votes on a $500 billion PPP Small Business loan/grant bill on Tuesday and Wednesday. In response, on Sunday, Speaker Pelosi set a Tuesday deadline for a deal prior to the election.
On Sunday AAL said they intend to return to the use of the BA 737 Max in December. Then, early Monday, COP said it will acquire driller CXO for $9.7 billion. In economic news, China also announced that its economy grew 4.9% in Q3, which brings YTD growth up to +0.7% versus 2019. However, in the Middle East, the IMF is forecasting a 4.1% economic contraction and oil prices to remain in the $40-$50/barrel range through 2021
On the virus front, in the US we have now gone over 8 million cases, with the numbers showing we now have 8,388,013 confirmed cases and 224,732 deaths. The 7-day average daily new case count rose again to 56,322/day, while the lagging average of deaths remains relatively flat at 718/day. 21 states reported a record number of new cases at least once in the last week. At the moment, 38 states are reporting new case numbers growing by more than 5% with only 2 states trending down and the country as a whole has seen a 16% increase in cases in the last week.
Globally, the numbers rose to 40,348,289 confirmed cases and the confirmed deaths are now at 1,119,305 deaths. Europe has overtaken the US to become the area with the highest average daily new case count (to be fair, Europe including Russia does have nearly 2.5 times the US population). This comes as the WHO is warning that many major cities across Europe may reach ICU bed capacity in the next couple of weeks based on the current new case and hospitalization rates. On cue, Poland began converting a soccer stadium into a field hospital, Italy announced new restrictions and the UK is in negotiations to lockdown its Northern city of Manchester.
Overnight, Asian markets were mixed, but overall, modestly higher. Taiwan (+1.24%) and Japan (+1.11%) led the gainers, while Thailand (-2.02% on political unrest) and China (-0.70%) led the losers. In Europe, markets are also mixed by generally higher so far today. Among the big 3 bourses, the FTSE is down (-0.22%), the DAX flat (-0.03%), and the CAC up (+0.32%). The other European bourses show a modest move in either direction, but lean to the green side. As of 7:30am, US futures are pointing to a gap higher at the open. The DIA implying +0.70%, the SPY suggesting +0.83%, and the QQQ indicating +1.00% at this point.
The major economic news for Monday is limited to Sept. Federal Budget Balance and 3 Fed speakers (Chair Powell at 8 am, Clarida at 11:45 am, and Harker at 3 pm. Major Earnings Reports include HAL before the open and CCK, IBM, LOGI, PPG, STLD, and ZION after the close.
The surging virus, lack of a stimulus deal, and earnings reports are likely to remain the big drivers of the market Monday. However, any potential news on the political front remains an overhang for at least another couple of weeks. And of course, the M&A world seems to still be in vogue as we head into the stretch run of the year. The one thing that is sure is that posturing is sure to add to volatility. So, continue to be careful in this market.
Lock-in your profits whenever you can and stick to your rules. Don’t get too greedy, chase the moves you have missed, and don't predict. Be sure you respect potential support and resistance. Follow the trend and stick wiht your trade plans. Friday's candles were ugly, but the market seems to want to shrug that off this morning.
Swing Trade Ideas for your consideration and watchlist: GLW, URI, HAS, NIO, CGC, GPS, MCRB, SPCE. 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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