The major indices gapped in a mixed manner Thursday, with large-caps both gapping down about half a percent while the QQQ gapped about a third of a percent higher. However, after the open, all three then trended lower all day on fears over the Covid-19 surge. At the end of the day, DIA closed down 1.04%, SPY down 0.97%, and QQQ down 0.47%. The VXX gained about 7% to 20.33 and T2122 fell back into the mid-range at 69.77. 10-year bond yields fell to 0.883% and Oil was off a percent to $40.69/barrel.
During the day, Fed Chair Powell and ECB President Lagarde agreed that the virus has changed the economy forever. While both expect the economy to recovery and eventually surpass the size of the pre-covid GDP. However, both say they expect it to be a different environment with automation replacing many human jobs and technology being leveraged to enabled far more virtual and distributed work. Generally speaking, they seemed to say that this pandemic has forced a dramatic increase in the pace of prior trends with technology. To them, this implies that the divergence between low-pay workers and high-pay workers will accelerate, meaning that portions of the economy dependent on low-pay workers as customers are at significant risk. At the same time, consumers will now be much more accustomed to online buying and remote service. So, retail and foot-traffic dependent businesses are all facing a different world than 12 months ago. Powell also took the chance to say the Fed will still need to do more than it already has and to lobby for more Congress and the Administration to do more fiscal stimulus.
The virus continues its wildfire surge. Thursday saw another huge spike in cases, up to a record 161,541 (a 20,000 case jump) in the US. This raised the totals to 10,873,936 confirmed cases and 248,585 deaths. The 7-day average of new cases to 135,399 while the average deaths rose to 1,086/day. During the day Thursday, Chicago issued a new stay at home order and the Mayor implored people to cancel Thanksgiving celebrations and stay locked down instead. CA also followed TX to become the second state to record over 1 million cases. Dr. Fauci (NIH) repeated his call to protect others by following guidelines, this time aiming at anti-maskers who he called “Americans with an independent spirit.”
Overnight, Asian markets were mixed, but mostly red again. Shanghai (-0.86%) led the losses, which were widespread but generally moderate. South Korea (+0.76%) and Thailand (+0.74%) led the gainers. In Europe, we see the same picture as mixed, but mostly moderately red so far today. Among the 3 major bourses, the FTSE is down 0.50%, the Dax up 0.18%, and the CAC up 0.35% at this point in their day. As of 7:45 am, US futures are also pointing to three-quarters of a percent gap higher at the open as of now.
The major economic news for Friday includes Oct. PPI (8:30 am), Michigan Consumer Sentiment (10 am), and a couple Fed Speakers (Williams at 7 am and Bullard at 8:30 am). Major earnings reports on the day are limited to SPB and VIPS before the open.
With a raging virus, very limited news, and a lack of major earnings today, expect the bears to have the edge and volatility to continue. Still, with the prospect of MRNA reporting initial effectiveness results (based on 54 patients) sometime in the next few days, the volatility could be on both sides. We need to remember that this is Friday and there is a long news cycle ahead. Don't get caught unprepared come Monday morning.
Don't chase the moves that you have missed. Fear of missing out (FOMO) is a deadly condition for traders. You don't NEED to trade every day. There will always be either another stock setup down the road. So keep locking in profits, maintain your discipline, and working your plan. Stick to your trading rules, follow the trend, and respect support and resistance.
Swing Trade Ideas for your consideration and watchlist: MAC, DIS, EVRI, ROKU, XLE, KO, UPWK, GLUU. 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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