Well, we had another ugly day in the DOW 30 Index yesterday as it dumped over 900 points and is close to falling through its 200-day moving average. If it does that the next support level is at the 1/3 retracement level of the March low and September peak at around 24900.
Now the S&P 500 and Nasdaq look a little bit better than the DOW does as you can see from this S&P 500 chart.
The S&P 500 is a little further away from its 200-moving average than the DOW is. One thing that has hurt the DOW is it lagged on the way up and yesterday DOW component Microsoft DUMPED after it reported earnings Tuesday evening for a -4.96% drop.
A lot of stocks have been selling their earnings reports. Typically the market will rally INTO earnings and then keep going up for another two to three weeks and then have some selling, but this time it peaked out this October in the week that earnings season began.
Remember traders tend to buy rumors and sell news so to speak. They also do the opposite – when they think something bad is going to happen the market will tend to fall into that bad event and bottom out as the bad news comes and doesn’t bring the end of the world with it.
Well right now the financial markets have been selling INTO the election. It actually did the same thing in 2016, but this time more people are worried about the election than they were that year on both sides of the political divide. The risk is that there election results are delayed election and that hurts the stock market, because of the disruptions that could bring. So some are getting out of the market ahead of that possible risk event.
Personally, I have no idea who will win or how close it will be, but these worries along with growing covid cases (which are already having an impact on the economy in Europe) are causing people to sell ahead of potential dire news – which probably won’t be as dire at they think.
Right now this is impacting just about everything as the only thing that went up yesterday was the Japanese YEN, TLT, the VIX, and the US dollar a little bit.
To be on top of the markets you have to look ahead. This situation should really be resolved next week.
At some point traders will start to play the next event and that is what we got to think about to look ahead.
What will that be?
Well the top vaccines in development right now are due to have test results finished enough to know if they work or not sometime from mid-November to mid-December. I’m talking about the Moderna one and the Astrazenca vaccine being developed in the UK. Throw Pfizer in too, because it “confirmed in its third-quarter update on Tuesday morning that it’s still on track to file for FDA Emergency Use Authorization of BNT162b2 by the third week of November,” according to Motley Fool.
That doesn’t mean the situation would be fixed in a jiffy. In the best case, “while the first shots could be authorized in the final weeks of 2020, federal health officials, drugmakers and Trump himself have said a stockpile to vaccinate all Americans will not be feasible before April 2021. From there, the arduous task of reaching vulnerable, isolated and skeptical people continues,” writes Politico.
So while the markets are dumping now – once the election is fully over – I fully expect the market traders and computer robots will start buying the markets ahead of potential news of a vaccine – and everyone wants some good news for a change in 2020.