Thursday saw another major gap up followed by a volatile day that left a significant upper wick (especially in the SPY) as markets gave back part of the gains at the end of the day. The SPY could certainly be seen as a Shooting Star type candle, while the QQQ was an indecisive Spinning Top Thursday. On the day the QQQ was up 2.61%, and both the SPY and DIA up 1.94%. The VXX was down again to 21.97 and T2122 climbed back deep into the overbought territory at 92.34. 10-year bond yields fell slightly to 0.765% and Oil (WTI) fell to $38.54/barrel.
Thursday afternoon the FOMC held rates at their near-zero level and said the economy continues to recover but remains well below pre-pandemic levels. Chairman Powell said that the Fed was not out of ammunition and will “remain accommodative” with loan and asset purchasing programs staying in place. He went on to continue urging more fiscal stimulus as pretty much every Fed speaker has done for months.
The election continues to be the main focus of talk and news. As the counts continue, a razor-thin margin has emerged in all the “swing states.” At the moment, it appears like Biden is winning with slight leads in Georgia and Nevada. However, enough votes remain to be counted that half a dozen states are still undetermined. And, of course, this is all before recounts and legal challenges to the validity of major groups of votes play out. All told, the market continues to rally, perhaps on the prospect of a split government with the Administration, Senate and House not all in one party’s hands. However, there is no word yet on the resumption of stimulus negotiations.
On the virus front, we had yet another record high of new cases Thursday (by over 10,000 cases) at 121,888 confirmed. In total, the numbers show we have had 9,926,637 confirmed cases and 241,026 deaths. This record day raised the 7-day average of new cases to 96,454 while the average of daily deaths to 905/day. In fact, the only two states trending down are AL and TN. As a result, more states have tightened mask mandates, imposed new restrictions on gatherings, and extended emergency proclamations. RI issued another stay-at-home advisory.
Globally, the numbers rose to 49,169,894 confirmed cases and the confirmed deaths are now at 1,241,870 deaths. This includes a global record day of 608,550 cases and 9,056 deaths, which has led the 7-day average of new cases to 523,344 while the 7-day average virus deaths is now at 7,338/day. Obviously, this means more restrictions, lockdowns, and economic trouble, especially throughout Europe.
Overnight, Asian markets were mixed but mostly green. India (+1.18%), Indonesia (+1.43%), and Malaysia (+1.21%) led the significant gainers. Meanwhile, Shenzhen (-0.77%) was the only significant loser among a handful of moderate losses. In Europe, markets are red across the board so far today. Among the big 3 bourses, DAX is down 0.86%, CAC down 0.71%, and the FTSE flatter at -0.16% as of mid-day. As of 7:30 am, US futures are also pointing to the red side. The DIA is implying a -0.48 open, the SPY implying a -0.67% open, and the QQQ implying a -0.96% open at this point.
The major economic news for Friday includes Oct. Avg. Hourly Earnings, Oct. Nonfarm Payrolls, Oct. Unemployment Rate, and Oct. Participation Rate (all at 8:30 am). Major earnings reports include AES, CLMT, CQP, LNG, COTY, CVS, DISH, UFS, ELAN, HSY, IEP, MGA, MAR, MYL, PRIM, TU, VTR, and ZBH before the open. There are no major reports after the close.
Election uncertainty remains as does a wild-fire virus. The politicians are still focusing on and/or absorbing the election results. So, stimulus measures are not yet back front and center in Washington. Expect more volatility and remember that this is Friday. After the run of the last few days, we may see more profit-taking and hedging going into the weekend.
Stick with your trading rules and maintain discipline. Keep taking your money when you reach goals and don't let profits evaporate waiting on "just a little more." Don’t chase the moves you have missed, follow the trend, and respect those support and resistance levels. Trading is a marathon, not a sprint.
Swing Trade Ideas for your consideration and watchlist: IVZ, DRI, HCA, IR, TUP, FLR, CFG. 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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