Markets gapped up Wednesday on hope that President Trump’s flip to tweeting for “one piece at a time” of the stimulus he wants would result in another relief package happening. Stocks then ground sideways until the early afternoon. At that point, the bulls stepped in to lead an afternoon rally. Most of Tuesday’s post-tweet losses were regained by the close Wednesday. On the day, DIA was up 1.84%, SPY up 1.74%, and QQQ up 1.73%. The VXX was down 3% to 24.50 and T2122 climbed further into overbought territory to 91.51. 10-year bond yields rose again to 0.783%, but Oil (WTI) fell about 2% to $39.98/barrel.
In stock news, IBM is surging in premarket after it announced plans to spin off an IPO of its Managed Infrastructure unit. Following the Presidential treatment / endorsement, REGN has asked the FDA for emergency use authorization of the cocktail given to President Trump. REGN shares were also up in premarket. Optimism also continues over stimulus, despite the President’s unilateral stoppage of negotiations, as markets seem to think pieces will get done soon as long as the President gets his way.
For a change of pace, the Vice-Presidential debate is leading all non-stock news (instead of the pandemic). While both sides spin the talking points and claim victory in the event, it seems the biggest take-away for markets may be a calming effect of seeing much more adult behavior. There were still clashes, but both debaters were allowed to finish a sentence without being talked over and badgered while speaking. This is likely reassuring to investors.
On the virus front, in the US, the numbers show we now have 7,776,796 confirmed cases and 216,788 deaths. After almost 49,000 cases Wednesday, the 7-day average daily new case count rose again and is now back up to 45,565, while the lagging average of deaths remains relatively flat now at 721 after another 932 deaths.
Globally, the numbers rose to 36,439,437 confirmed cases and the confirmed deaths are now at 1,061,239 deaths. In the UK, Scotland has ordered all bars closed as of Friday for at least 16 days. At the same time, the UK released a study saying that the mass hospitalizations and deaths are only coming from 14% of patients, because 86% of cases are asymptomatic (which of course makes it harder to stop the spread). This comes as the Czech Republic reports the highest new case count since the start of the pandemic and Central Europe has surpassed Southern Europe (Spain, Italy, and France) as the epicenter in Europe. In North American, Canada has reached a new high in its weekly average of new cases, with 80% of the cases coming from Ontario and Quebec.
Overnight, Asian markets were mostly higher on modest gains with Japan (+0.96%) leading the gainers among the major exchanges. In Europe, so far today we see green across the board, again on modest gains. Among the major European Bourses, the FTSE is at +0.45%, the DAX at +0.65%, and the CAC at +0.50% as of mid-day. As of 7:30am, US futures following Europe and pointing to roughly half percent gap higher at the open. The DIA is implying a 0.49% gain, SPY a 0.44% gain, and QQQ a 0.58% gain at the open.
The major economic news for Thursday is limited to Initial Jobless Claims (8:30 am) and a Fed speaker (Kaplan at 6 pm). Major earnings reports on the day are limited to AYI and DPZ before the open.
The bulls put in an impressive day Wednesday on the rebound from the Tuesday late-day tweet drubbing. We are close to being back where we were just prior to that tweet on what had looked like a positive Tuesday. If the gap higher stays in place for the next couple hours, that move will put markets at (or even just above) the closest resistance level, giving the bulls that chance to deliver a higher-high to make a bullish trend.
Volatility still reigns. The market is simply assuming stimulus without a truly clear path to it taking place. So, continue to be careful. However, if you can be light, nimble, and short-term, this could be a tradable move. In any case, stick to those rules and don’t chase moves you have missed. Lock-in those profits every chance you get. Remember that a trader's job is to consistently take gains and reduce risk, not win bragging-rights.
Swing Trade Ideas for your consideration and watchlist: KNDI, BIDU, TXMD, GNUS, LB, OKE, ABUS, AAPL, SRNE. 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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