On Tuesday, the bulls couldn’t find the energy to get past the bad news that the MRNA coronavirus vaccine trial did not actually produce the data required to be pass a Phase 1 trial. So, the Monday enthusiasm seems to have been very premature based on just company good feelings. As a result, all 3 major indices failed their breakout levels and printed bearish candles closing at the lows. The SPY was down 1.03%, the DIA down 1.51%, and the QQQ down just 0.25%. The VXX gained to 36.03 and T2122 fell a bit down to 82.05. 10-year bond yields fell to 0.688% as money bid up bonds. However, Oil (WTI) managed to gain to $32.36/barrel.
The Congressional Budget Office announced that it projects GDP to drop 38% in Q2, which is inline with Wall Street estimates. Fed Chair Powell also testified before Congress, essentially saying they will spend whatever it takes to put the economy right. Treasury Sec. Mnuchin testified as well, saying the Administration is fully prepared to provide more money and take more risks (including losses) on business bailouts.
On the Virus front itself, the global headline numbers are 5,006,675 confirmed cases and 325,322 deaths. The UK said it will need massive participation from Brits in order to get their summer harvest done as they expect only about a third of the foreign workers who normally perform the harvest. In Europe, Germany has agreed with neighboring countries to being slowly easing border restrictions.
In the US, we have 1,571,131 confirmed cases and 93,558 deaths. Johns Hopkins University reported that 17 states have seen at least a 10% increase in new case rates in the last week. However, 16 states have also seen a drop of at least 10% over the period. This comes as every state will be at least partially open as of today.
Overnight, Asian markets were mixed with China down while Japan and South Korea were up. In Europe, we also see a mixed story at this point. France and Belgium are down, but the UK and Germany are just on the green side of flat now. As of 7:30 am, US futures are pointing to more than a 1% gap higher as Lowes reported same-store sales grew over 11% and it beat on both the top and bottom lines.
The major economic news on Wednesday is limited to Oil Inventories (10:30 am) and FOMC Minutes (2 pm). Earnings are limited to ADI, EV, FRO, LOW, MCK, RCL, and TGT before the open. Then CPRT, EXPE, LB, SNPS, and TTWO report after the close.
Based on Tuesday’s candle, we might expect a lower-low today and all 3 major indices do remain near a resistance/breakout point. However, the bulls have a strong tendency to run hard in spite of any bad news and the bears haven’t been able to string together a sustained pullback for two months. As said above, markets are looking to gap higher again. So, all we can do is watch the short-term chart and then trade the chart in front of you. Don’t chase or predict, and remain cautious about longer-term swing trades.
No Trade ideas for today. Trade smart, take profits along the way and trade your plan. 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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