Slow News Day Follows Record August

Monday was a day of divergence in the major indices.  The SPY had a tiny gap down and then chopped sideways all day.  The DIA gapped down a bit more and then followed through a bit before grinding sideways all afternoon.  Meanwhile, QQQ gapped up and rallied more-or-less all day on the back of the TSLA and AAPL split moves.  On the day, SPY closed down 0.22%, DIA down 0.89%, and QQQ up 0.80%.  The VXX rose almost 5% to 26.85 and T2122 fell all the way back to 42.34.  10-year bond yields fell to 0.705% and Oil (WTI) was down just a touch to $42.81/barrel. This capped the strongest August market in decades.  During the month the S&P500 rose more than 7%, the most since August 1984.

Change is coming I’m afraid.  During the day, AMZN, joined UPS and GOOG as firms who have been given FAA approval for drone deliveries beyond the line of sight of the pilot.  AMZN told CNBC it was not yet ready for its drone fleet to begin the deliveries, but this is another step toward 30-minute delivery of packages up to 5 pounds soon.  UPS has already done CVS prescription deliveries in one high-end FL suburb and GOOG has been doing drone delivery to a VA town since last October.  

WMT announced it will launch its Walmart+ membership program on September 15.  While the company claims the program is not designed to compete with any other service, it is seen far and wide as a direct competitor to the AMZN Prime membership.  Prices of the two services are similar ($119/yr. or $12.99/mo. for Prime and $98/yr. or $12.95/mo. For Walmart+), but Prime includes free two-day shipping and other services like video streaming while the WMT offering includes gas discounts (up to 5 cents/gallon) and expedited in-store checkout.

On the virus front, in the US, the numbers show we now have 6,212,174 confirmed cases and 187,742 deaths.  While 26 states reported an increasing number of new cases, the overall national number remains far below the 7-day average at “just” 38,560 new cases Monday. 

Globally, the numbers rose to 25,662,163 confirmed cases and 855,352 deaths. Europe reported a 6% spike in cases last week, led by a 21% increase in Spain, 16% in Russia, and 10% increase in France.  In Asia, a private survey found that Chinese manufacturing PMI rose faster in August than it has in over 10 years (at 53.1 vs. 52.7 expected). 

Overnight, Asian markets were mixed, but the big-economy indices were all in the green as South Korea, China, and India led and Japan was flat.  With the exception of the FTSE (whish is down 1.2% at mid-day), all the European bourses are in the green so far.  In the US, at 7:30 am, the futures are pointing to a divergent open.  The Dow Futures imply a DIA open that is flat, S&P futures imply a SPY open up three-tenths of a percent and Nasdaq futures imply a QQQ open up 0.90%. 

The only major economic news for Tuesday is August Mfg. PMI (9:45 am), August ISM PMI (10 am), and a Fed speaker (Brainard at 1 pm).  There are also no major earnings reports on the day.

Just prior to publishing this blog, TSLA announced they will sell an additional $5 billion of stock following its 5-for-1 split apparently to take advantage of the rally and very high valuation.

Markets are pointing to a desire to follow-through on a record-breaking August.  As has been the case, we remain extended above the moving averages, but only the DIA shows even a hint of a bear being around. And even that index is holding a strong bullish trend.  So, follow the trend, but don’t chase moves you have missed.  Stick with your rules and work to consistently lock-in profits and reduce risk. 

Ed

The Daily Swing Trade Ideas for today: NIO, SQ, AMD, FB, KMB, MKC, JNJ, MCHP, KO, PG, VXX. 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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