Tuesday was a down day as oil led us lower again. Following the May contract going negative Monday, on Tuesday the June contract fell 46%. As a result, stock prices gapped down 2% at the open, sold off again mid-morning and then just ground sideways the rest of the day. Prices closed near the lows as the SPY lost 2.99%, the DIA lost 2.69%, and the QQQ lost 3.69%. VXX was up again to 46.38 and the T2122 4wk high/low ratio avg. fell to 57.78 (so it remains in mid-range). The 10-year bond yield fell again to 0.563% as money chased bond safety. Oil looked great on a daily percentage basis compared to the smoking crater of Monday, rising 124%. However, it also closed at $9.06/barrel which would be the lowest close since World War II other than Monday.
After the close, the Senate approved the $484 billion addition to the $2.2 billion bailouts and stimulus plan. This includes $320 billion more for the small business payroll loan/grants, $60 billion in small business disaster loan/grants, $75 billion for hospitals, and $25 billion for more COVID-19 testing. The main items pushed off until the next so-called “relief bill 4” is money for state and local governments (which the White House may oppose) as well as infrastructure (which Senate Republicans have opposed). There was no mention of the President’s Tuesday promise to provide bailout money to help the US oil industry. The House is scheduled to vote on the bill Wednesday or Thursday.
On the Virus front, after the close, the director of a key US vaccine agency left his job unexpectedly. Dr. Rick Bright was leading the Biomedical Advanced Research and Development Authority, but was apparently demoted after clashes with HHS Dept. leaders. One of his deputies takes over as the acting director. Meanwhile, the global headline numbers are 2,580,729 confirmed cases and 178,668 deaths. At the same time, in the US we now have 825,306 confirmed cases and 45,343 deaths.
In terms of restriction easing, Attorney General Barr threatened to sue Governors who keep strong restrictions. He claimed that stay-at-home orders are too close to house arrest, while also saying “he wasn’t saying they weren’t justified.” Meanwhile, many states seem to oppose the AG’s opinion, such as the North Carolina Governor saying “Staying home is saving lives,” Louisiana saying it may issue another stay-at-home order when the current one expires May 1, and New Hampshire saying it has “a ways to go before it reopens.” Beyond reopening, the CDC warned the public that a second wave of the virus next winter could even worse than the current one.
Overnight, Asian markets were mixed but leaned to the green side. In Europe, markets are green across the board so far today. As of 7:30 am, US futures are pointing toward a 1%-1.75% gap higher, perhaps based on hope for the new $484 billion in relief or on oil markets stabilizing.
The major economic news for Wednesday is limited to Crude Oil Inventories (10:30 am), which we already know are massive. However, on the earnings front, T, APH, BKR, BIIB, DAL, ERIC, IPG, KMB, LAD, NDAQ, NEE, NLSN, DGX, STM, and TMO all report before the open. Then WHR, LVS, KMI, DFS, CSX, FTI, AA, LRCX, ORLY, STX, FNF, AMTD, RUSHA, LSTR, and XLNX report after the close.
The uptrend has now been broken, but Tuesday’s ugly candles took all 3 major indices back down near potential support. Gaps and volatility remain the norm, while earnings and nasty economic news continue to drive trading. So, we need to continue to be very focused, and either be fast (day trade) or slow (long-term holds). Be very cautious about any swing trades you take in this news-driven market.
No Swing Trade Ideas for your consideration and watchlist for Wednesday. 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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