MRNA Vaccine Hope Drives Futures

On Tuesday, markets saw a small gap down after a JPM earnings beat was offset by increased loan loss provisions.  However, after a negative open, the bulls were in control the rest of the day, closing near the highs.  Interestingly, it was cyclical stocks like CAT, CVX, XOM, and BA that led the way for the day.  DIA put in a Bullish Engulfing candle and the SPY printed a Bullish Piercing candle.  At the end of the day, DIA was up 2.13%, SPY up 1.30%, and QQQ up 0.71%.  VXX fell almost 6% to 33.20 and T2122 rose back closer to overbought territory at 73.33.  10-year bond yields fell to 0.628% and Oil (WTI) climbed back to $40.28/barrel.

After the close, MRNA reported that their potential vaccine produced “robust immune response” (antibodies) in all 45 subjects in their Phase 1 test. This is not a new test, but a clarification of the report on the same small trial that was first reported in May. The only additional news was a firm date of July 27 (had been in terms of "late July") for the start of a 30,000 patient Phase 3 trial of the vaccine.  MRNA stock was up over 15% in after-hours trading on the report.  Travel stocks including both airlines and cruise lines also spiked after-hours on this news.

In the US, the virus numbers show we have 3,546,278 confirmed cases and 139,162 deaths. TX reported 10,745 new cases Tuesday.  In FL, Miami-Dade County is now reporting a 31% positive result rate on tests.  Meanwhile, the CDC said that if all Americans wore masks, we could have the virus under control in a month or two.  However, that is nowhere near the case in the US.  As a result, the US 7-day average of new cases is well over 62,000/day. 

Globally, the numbers have reached 13,487,894 confirmed cases and 581,978 deaths.  In news that is perhaps tangential to the MRNA report, a study published in the UK reported that a 90-patient study has found that immunity from antibodies only lasts two months before waning.  (That might mean the sale of many more doses of vaccine.)  Further East, India reported over 29,000 new cases yesterday in its biggest 1-day increase.  Closer to home, Mexico announced it is extending the border restrictions with the US until at least August (both countries restricted all non-essential crossings back in late March).  This comes as Mexico has now become the 4th worst-hit country (in the total number of deaths). 

Overnight, Asian markets were mixed, with Chinese indices down on reports of heavy increases in food prices, brought on by virus impacts and massive floods across their country.  In Europe, markets are much more broadly green with hopes for a vaccine lifting spirits.  The FTSE is up 1.78%, DAX up 1.96% and CAC up 2.35% at this point in their day.  In the US, as of 7:30 am futures continue their overnight run on the MRNA news.  DIA is up 1.67%, SPY up 1.34%, and QQQ up 0.96% at the moment.

The major economic news for Wednesday includes June Import / Exports and July NY Fed Empire State Mfg. Index (both at 8:30 am), June Industrial Production (9:15 am), Crude Oil Inventories (10:30 am), and a Fed Speaker (Harker at noon).  Major earnings reports include ASML, BK, EBAY, GS, INFY, OMC, PGR, PNC, UNH, and USB all before the open.  After the close, AA, and SNBR report.

Tuesday’s candles were quite bullish within the recent series of 1-day moves.  However, it looks like vaccine hopes will drive markets early today (rather than the recent pattern).  So, the consolidation may be coming to an end.  The bulls certainly look to be chasing the recovery trade (travel-related for example) overnight.  However, don’t get too giddy.  Keep an eye on those “canary in the coalmine” FAANG stocks.  They’re so big that they will call the tune for markets.  Watch those short-term charts and don’t chase, don’t predict, and take profits as you go.  Remember we are in earnings season now, so some surprises are likely to happen.

Ed

The Daily Swing Trade Ideas for today: HD, MCD, GE, FTCH, JNJ, SPCE, KO, AMGN, BUD, ABBV, JPM, XLF. 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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