Still No Stimulus Deal But Hope Remains

Stocks gapped higher at the open for no particular reason except hope for stimulus, but that was just a bull trap.  After the first 5-minutes, the rest of the day saw an all-day selloff which saw prices close near the lows.  The DIA printed what looked like an Evening Star pattern, as did the SPY (if you squint) with the QQQ printing the biggest black candle of the bunch.  All 3 indices gave up their mid-term uptrends and look to be headed down toward their 50sma for a retest.  On the day, QQQ was down 1.63%, SPY down 1.52%, and DIA down 1.38%.  The VXX rose over 4% to 23.24 and T2122 fell all the way to the lower end of the midrange at 32.28.  10-year bond yields rose significantly to 0.772% and oil fell half a percent to $40.71/barrel.

On the stimulus front, after the close Monday it was reported that House Speaker Pelosi and Treasury Sec. Mnuchin made some progress in their talks.  The pair plan to talk again Tuesday.  In the meantime, Senate Republicans oppose the deal the two sides are working toward.  So, on Tuesday, Majority Leader McConnel is still planning to propose a bill about one-fourth the size what Pelosi and Mnuchin are negotiating (covering $500 billion in PPP Loan/Grants for small businesses) in hope of passing it in the Senate in a vote Wednesday.  With all this, there still seems to be optimism in the market that a deal can be reached before the election.

After hours, INTC announced that they had agreed to sell their NAND memory unit to South Korean firm SK Hynix for $9 billion.  Early this morning PG reported a huge beat on sales (+9%) on high demand for household items.

On the virus front, in the US the numbers show we now have 8,459,041 confirmed cases and 225,241 deaths.  The 7-day average daily new case count rose again to 59,124/day, while the lagging average of deaths remains relatively flat at 741/day.  At the moment, 37 states are reporting virus hospitalizations increasing more than 5% since last week.  More ominously, a half dozen states report ICU bed utilization over 80%. At the same time, 41 states are reporting new case numbers growing by more than 5%. 

Globally, the numbers rose to 40,720,262 confirmed cases and the confirmed deaths are now at 1,124,213 deaths.  In Europe, Ireland has imposed a 6-week national lockdown closing bars, restaurants, offices, and limiting gatherings to fewer than 6 people.  Meanwhile, the UK has set a deadline for the city of Manchester to comply with a lockdown order with the threat of national government intervention if they do not comply.  However, in Asia, Hong Kong has slightly reduced restrictions after a week with a better trend in new cases.

Overnight, Asian markets were mixed again.  Japan (-0.44%), Australia (-0.72%) are typical on the losing side.  Meanwhile, Shanghai (+0.47%) and South Korea (+0.50%) are typical on the green side.  Shenzhen (+1.33%) was the only mover of more than one percent.  In Europe, markets are also mixed, but generally lean to the positive side.  Among the big 3 bourses, the FTSE (+0.31%) and CAC (+0.56%) on green while the DAX (-0.27%) shows red at this point.  The rest of the continent is mixed, but the larger moves are to the plus side at this point in their day.  As of 7:30 am, US futures are pointing to another gap higher at the open. The large-cap indices are both implying a move of +0.74%, while the QQQ is indicating +0.71% at this point.  

The major economic news for Tuesday is limited to Sept. Building Permits and Sept. Housing Starts (both at 8:30 am), and 2 Fed speakers (Williams at 9 am, Quarles at 10:50 am.  However, earnings are ramping up with ACI, CP, DOV, GPK, IQV, LMT, MAN, NVR, PCAR, PM, PG, RF, and TRV reporting before the open.  Then after the close AGR, CNI, CSL, NFLX, TER, THC, TXN, and WRB all report.

The virus continues to surge, no stimulus deal has been reached, and the politicians of both parties are more focused on the impending election than the nation's business. Nonetheless, the hope/expectation of more stimulus very soon appears to remain high in the market. earnings reports are likely to remain the big drivers of the market Monday. Earnings are the wildcard, with mixed but generally positive results reported against much-lowered expectations. The one constant is raised volatility. And don't forget there are ACB confirmation votes and the final Presidential Debate coming this week that is sure to raise the political risk.

So, continue to be careful in this market. The short-term trend remains strongly bearish and has broken the medium-term uptrend. Lock-in your profits whenever you can and stick to your rules. Singles and doubles in the bank beat hope for a home run every time. Don’t get too greedy, don't chase the moves you have missed, and don't predict. Be sure you respect potential support and resistance.  Follow the trend and stick with your trade plans. Monday's candles were ugly, but again this morning the market seems to want to shrug that off.


Swing Trade Ideas for your consideration and watchlist: MRNA, TNA, FAS, DDOG, BYND, RIOT, NIO. 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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