FAANGs Holding Markets Up

Markets opened modestly higher Thursday on slightly better than expected Initial Jobless Claims.  However, this was met with an immediate and strong selloff that took us to the lows by 11:30 am.  While bulls rallied up off these lows, they were never able to climb back to flat.  The NASDAQ closed at yet another record high close as AMZN, AMD, and NVDA almost single-handedly held markets up.  At the close, SPY was down 0.50%, DIA down 1.32%, and, as noted, QQQ up 0.84%. The VXX also climbed a bit to 33.06 and T2122 (4-week New High/Low Ratio) edged closer to overbought territory at 73.75.  10-year bond yields fell sharply to 0.607% as money chased bond safety.  And Oil (WTI) also sold off to $39.48/barrel.

Treasury Sec. Mnuchin told CNBC Thursday that the White House will not back the kind of sweeping coronavirus relief they supported before.  Instead he said they would only accept a smaller, narrower package.  As often happens in the Administration, this seems to be at odds with the President’s own words from a week ago (when he said he wanted to give away more money than the Democrats, but just “to do it right”).  However, it does line up with consistent statements out of Senate Republicans.  Either way, Congress will return in just under two weeks to resume negotiations and votes. 

In other political-market news, Democratic Presidential nominee Biden laid out his “Moderate plans for an economic recovery.”  Among other things, he said that “(the wealthy investor class) don’t need me.”  The plans he announced include the raising of corporate tax rates to 28% (the mid-point between prior corporate rates and the current 21% rate President Trump pushed through.)

In the US, the virus numbers show we now have 3,220,559 confirmed cases and 135,828 deaths. This includes another record of over 62,000 new cases reported nationally.  A dozen states reported a record-high number of new cases Thursday.  Among them, CA, FL, and TX all reported record virus-related deaths on the day. In FL, Miami-Dade County recorded a 33% positive result rate on all tests processed Thursday.  Meanwhile, Dr. Fauci (NIH) told the Wall Street Journal “any state that is having a serious problem, that state should seriously look at shutting down.”  

Globally, the number of cases has reached 12,420,723 confirmed cases and 558,091 deaths.  In a huge case of stating the obvious, the W.H.O. reported "the pandemic is getting worse" on a day when the world reported a record number of new cases (227,000).  Among the countries reporting record-high new case counts were the US and Mexico, both of which reported a daily record in both cases.  However, even though Brazil did not report a record number of new cases, Mexican numbers still pale in comparison to Brazil who reported almost 43,000 new cases and over 1,200 deaths on the day.

Overnight, Asian markets were red across the board with the lone minor exception of Malaysia.  In Europe, markets are mixed, but mainly green at this point in the day.  The big 3 bourses (FTSE, DAX, CAC) are all up half a percent.  As of 7:30am, US futures are all pointing to a modestly lower open.

The only major economic news for Friday is June Producer Price Index (8:30 am).  The only major earnings report for the day are GBX before the open and SJR after the close.

Thursday’s candles were fairly ugly, with a Bearish Engulfing signal in SPY and DIA.  However, despite this, a consolidation pattern is all we can point to in those two indices, especially since the mega-cap techs continue to pull the entire market higher.  Are the QQQ extended?  Absolutely.   However, that doesn’t mean they must reverse today.

Keep an eye on those “canary in the coalmine” FAANG stocks.  If they break, so will the market.  If they maintain their rally, there is nothing the rest of the bears can do to fight their momentum.  So, keep an eye on the short-term chart and don’t chase, don’t predict, and take profits as you go.  Also, remember its payday.  Take some profits off the table and/or hedge you positions in front of the weekend.

Ed

Daily trade ideas have been moved to the trading room and the Members-Only Phone App. 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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