Stocks gapped down half a percent perhaps following Europe and perhaps in profit-taking after the recent run-up. In either case, there was a morning rally to fade that gap and take markets higher. However, then an all-afternoon selloff took over with prices closing near the lows. This brings the possibility of a new “lower high” in charts of the large-caps, but the QQQ remains solidly bullish in trend. On the day, SPY fell 1.03%, DIA fell 1.51%, and QQQ fell 0.69%. VXX gained 3% to 33.39 and T2122 fell near oversold territory at 22.46. The 10-year bond yield fell to 0.64% as money bought up bonds and Oil (WTI) fell slightly to $40.49/barrel.
During the afternoon, FB reportedly had a bad call with the organizers of the advertising boycott they are suffering. Multiple outlets report the call "didn't go well" as the company failed to address any of the boycott’s 10 demands. So, no change in the positions of the sides, but FB is apparently unfazed since their top advertisers aren't participating in the boycott and the stock is trading near all-time highs. This all came as a 2-year audit of FB civil rights record (commissioned by FB and carried out by a former ACLU executive) found shortcomings and a mixed record at best as outlined in a 100-page report released this morning.
Three Fed speakers (Bostic, Mester, Daly) also spoke Tuesday and all said problems remain in the economy. More importantly they see a leveling or even slowing in the recovery over the last week or two. All three said additional fiscal stimulus is needed from Congress and the White House. They also all reiterated that they don’t foresee Fed tightening or any reduction of monetary stimulus until at least 2022-2023.
In the US, the virus numbers show we now have 3,097,538 confirmed cases and 133,991 deaths. This includes 60,000 new cases on Tuesday as 36 states are reporting at least a 5% increase in their 7-day average of new cases. Among them, TX reported more than 10,000 new cases on Tuesday (a record) as their positive test rate sits at 13.5%. FL is also seeing a huge spike in test positivity with 16.3% of tests coming back positive. However, there has seen a little decrease in actual new cases, which was welcome as 78% of the state’s hospital beds and 83% of the state’s ICU beds are filled. In NJ, movie theatre chains AMC and CNK have filed a lawsuit against the state, claiming that keeping theatres closed is unconstitutional. Meanwhile, Dr. Birx (White House Task Force) told Bloomberg she praises those governors who have mandated masks despite the President’s resistance, citing TX Governor Abbott specifically.
Globally, the number of cases has reached 11,980,389 confirmed cases and 547,321 deaths. In Spain, there was a blow to hopes for those who support the idea of “herd immunity.” A study has found that only 5% of the Spanish population has antibodies, despite being one of the countries hit hardest in the percentage of population contracting the disease. (For reference, experts say 70% would need antibodies to provide effective herd immunity). The surge in cases also continues in Latin America, with Mexico, Brazil, and several other countries South of the Border reporting record increases.
Overnight, Asian markets were mixed again. China was up almost 2% and Hong Kong was also solidly green. However, Japan, Australia, and India were all solidly red while South Korea was down a quarter of a percent. In Europe, markets are red across the board, but on smaller moves. The minor exceptions to that rule are Greece and Norway, which are just on the green side of flat at this point of the day. As of 7:30am, US futures are all just on the green side of flat at this point.
The only major economic news for Wednesday is Crude Oil Inventories (10:30 am). The only earnings reports for the day are MSM before the open and BBBY after the close.
Tuesday’s candles were ugly. However, the bears still showed no teeth with no panic or heavy selling pressure coming in. Instead, it just seemed like the bulls paused to take a breath rather than actually showing fear of the virus surge. With that said, we have to respect the lower-high if we get follow-through today by the large-caps. So, take care of getting too bullish, but also remember the only bearish traders that have not been punished in recent months are those that are fast and obey their stops. Keep an eye on the short-term chart. Don’t chase, don’t predict, and don’t be greedy (take profits and move your stops as you go).
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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