Hopeful improvements in Europe

Hopeful

Hopeful improvements in Europe have the bulls gaping the market up to challenge the highs of last week.  The President also issued a statement of hopefulness with the first decline in the daily number of deaths for New York. That's good news to be sure, but health officials warn the next couple weeks will be worst we have seen to date.  With infection numbers nearing 350,000 and the death toll headed to 10,000, expect a lot more news-driven volatility in the week ahead.

Asian markets opened the trading week mostly bullishly, with Japan rallying nearly 4.25% by the close.  European markets are celebrating a gradual slowdown of new virus infections with the DAX up more than 4% this morning.  The US futures point to a gap up that may regain last week's market highs at the open ahead of a light day of earnings and economic data.

Earnings Calendar

3-Month Bill Auction 11:30 AM ET

6-Month Bill Auction 11:30 AM ET

TD Ameritrade MX 12:30 PM ET

Earnings Calendar

On the Monday earnings calendar, we have 37 companies fessing up to results.  With mostly small, very small-cap and penny stocks today there are no particularly notable reports today.

Top Stories

With some hopeful viral improvements in Europe, the bulls are feeling the desire to run.  The British Prime Minister is now in the hospital due to a worsening case of the virus with the euro-zone reporting the cases and deaths are appearing to slow.

The oil price has once again turned lower, with the deal between Russia and Saudi Arabia delayed.  However, reports suggest they are close to an agreement to cut production, putting a floor in the price of the commodity.

Although there more than 700 deaths in New York this weekend, the numbers declined for the first time.  The President issued a hopeful statement that things are getting better, but health officials warned that this week things would likely get much worse comparing it to Peral Harbor.  With infection numbers nearing 350,000 and 9600 deaths and airlines cutting more than 90% of the flights in and out of New York, suggests we still have a long road to recovery in the US.

Technically Speaking

What we hear in the news is the Dow is leaping higher as numbers in Europe improve.  While that is true, let's keep in mind that even with this morning's rally, the Dow has only recovered to last week's highs that could serve as price resistance.  I welcome any bullishness, but an 800 point opening gap into price resistance is not a reason to get all caught up in fear of missing out and chasing the open.  Remember your rules and the patterns that you trade.  Plan your trades carefully with careful consideration of your tolerance to risk.

Should the Dow recover and hold the 2018 market low of support and the QQQ recover and hold its 500-day average, we may well have some technicals and price patterns to build a bullish case upon, but let's assume nothing and wait for the proof.  Health officials suggest this could be a dreadful week for the US.  Should that prove true, expect news-driven price action that can produce whipsaws and full-on reversals.  Long story short, let's hope for the best but prepare for the possibility that the road ahead is likely to be extremely challenging.

Trade Wisely,

Doug

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