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Great Vaccine News Drives Markets Up Today, But What Is Next? – Mike Swanson (11/09/2020)

Right after my morning email went out, news hit that Pfizer’s early analysis of its vaccine is showing a 90% effectiveness rate! That’s great news. It will have complete results by the end of the year and projections are that a vaccine will started to be distributed in January. And we’re going to get more results for other top vaccine trials from other companies before Christmas. It’s looking like the virus situation will finally start to go away in the first quarter of next year.

Before the election I did a key post saying that once the election happened traders would buy stocks into expected vaccine trial news. That news is just coming quicker than I expected.

So what is next?

Well, the news this morning created an epic GAP UP in the stock market and caused gold to drop hard as people fled safety trades. In my view none of the market trends in anything has changed. Gold’s drop negates the triangle breakout we saw in it last week, but that’s ok as it will just go sideways again and breakout. And the stock market was already trading above its 200-day moving averages.

The best thing to do is NOT to react by buying something up huge today or sell something down either, but only look for things that are actually breaking out of a consolidation pattern. Don’t chase.

As for the short-term it does set up a situation where things down like gold and silver will have to put in a bottom and base whereas I’d expect the stock market to actually drift for a few weeks here before doing anything.

When something gap ups huge typically it will jam into a narrow range for a week or two before making another move. For instance, AAPL and TSLA both did this in August after they gapped up on news that they were going to do a stock split.

The area I circled on this TSLA chart is what I mean about the type of action that typically happens after a massive gap up.

Also, the drift in late April and May also is the sort of action we can expect.

Ironically, the big cap tech stocks are lagging today and the stocks that are up the most are stocks that have been heavily shorted. A giant gap up in the markets like we saw this morning forcing shorts to cover and just as a big gap down in something shakes out the weaker hands, which tend to be those on margin.