Markets started off flat on Thursday, but began a rally at 11 am that lasted the rest of the day (on optimistic stimulus comments from House Speaker Pelosi). This left all 3 major indices with hammer-like candles (although the QQQ hammer has a black body). On the day, SPY gained 0.56%, DIA gained 0.62%, and QQQ was dead flat. The VXX lost 2% to 22.15 and T2122 4-week New High-Low Ratio climbed back into overbought territory at 86.56. 10-year bond yields rose sharply to 0.865% and Oil (WTI) was also up 1.5% to $40.65/barrel.
The big news during the day was the House Speaker Pelosi told reporters “we are just about there” on a stimulus deal. She went on to say the remaining issues seem to be wording and then getting Senate Republicans to agree to the deal. However, White House staff (like Economic Advisor Kudlow) expressed optimism that they “could round up the needed votes from their side of the aisle.” That said, no official deal has been announced yet, nor votes scheduled, let alone timing of any disbursements.
After the close, the FDA approved GILD antiviral drug remdesivir as an emergency use treatment for Covid-19 and their stock soared after-hours. MAT stock also jumped on an earnings beat (heavy Barbie and Hot Wheels sales). However, even though INTC beat overall, the stock got thoroughly hammered on poor results both in the consumer desktop and the cash-cow datacenter sectors (where AMD is eating their lunch despite INTC’s massive market share). Later Thursday night a CA Appeals Court ruled UBER and LYFT must comply with state and federal employee labor laws for all people they had previously treated as independent contractors.
On the virus front, in the US the numbers show we now have 8,664,365 confirmed cases and 228,423 deaths. After another day with 74,301 cases, the 7-day average daily new case count has risen to 62,993/day, while the 973 deaths only moved the daily average of deaths slightly to 808. 5 states reported new record high daily case counts, while 14 more states reported record-high 7-day average counts. Chicago announced business closures from 10 pm to 6 am as new cases, hospitalizations and deaths have spiked in that region.
Globally, the numbers rose to 42,083,997 confirmed cases and the confirmed deaths are now at 1,144,239 deaths. This includes the world seeing over 478,000 new cases Thursday (a record high new case count). Global Covid deaths have also risen (almost 7,000 again on the day), but on average remain about 5,690 per day. A record for new cases were reported throughout Europe, including Spain, France, Italy, Portugal, Germany, and the Netherlands. However, in Asia, India continues to open up its country (economy) in belief they are past the most recent wave.
Overnight, Asian markets were mixed, but leaned to the red. Shenzhen (-1.90%) and Shanghai (-1.04%) led the losses, while Hong Kong (+0.54%) and New Zealand (+0.51%) led gainers. In Europe, markets are solidly green across the board so far today on hope for US stimulus. Among the big 3 bourses, the FTSE is up 1.53%, the DAX up 1.11%, and the CAC up 1.37%. The rest of European Exchanges are more modestly green. As of 7:30 am, US futures are pointing to a modestly higher open with all 3 major indices showing +0.22% as of now.
The major economic news for Friday is limited to Mfg. PMI and Services PMI (both at 9:45 am). However, major earnings reports include ALV, AXP, BLMN, CLF, CRI, and ITW all report before the open. There are no earnings reports after the close.
With the Presidental Debate done, little major economic news, and relatively few major earnings, the main driver of stocks Friday is likely to be stimulus negotiations. Even with both sides of the negotiation saying a deal is close, much doubt remains. The third-side that was essentially not part of the negotiations (Senate GOP) will have the ball in their court once a deal is passed. So, major doubts remain whether anything will get done before the election. That being the case, we are likely to see more volatility until more clarity emerges with hope driving markets up and fear of delay or renegotiation with the Senate Republicans driving prices down. Meanwhile, the virus continues to surge, but markets seem to have baked that fact into the cake and are now more worried about political risk and stimulus.
Remember this is Friday, so think about whether you need to hedge or lighten up in front of the weekend news cycles. Also, continue to be careful and nimble in this whip-saw market. The short-term trend remains bearish and has broken the medium-term uptrend. However, it looks like we may have found some support the last 3-4 days and all it will take is a whiff of a stimulus deal to turn the bulls loose. So, keep locking-in your profits and sticking to your trading rules. 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 trade your plan.
Swing Trade Ideas for your consideration and watchlist: DIS, WBA, GILD, SCHW, SO, WRB, XLE, TLRY, USB, AA. 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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