Today, the market gapped up as news of Pfizer (PFE)'s Covid vaccine being 90% effective was released.
Last week, we talked about the Economic Modern Family's uncertainty over the election and potential gridlock over a Republican senate. The uncertainty looks to have followed into Monday, as today's exciting gap was cut short, with the major indices selling off throughout the day.
Possible reasons for today's dampened price action could relate to a questionable Biden win, plus hopeful vaccine news that doesn't have a clear date for mass distribution, thus turning a hopeful morning into a decent selloff going into today's close.
The only big winner in the Family today was the regional banking sector (KRE), which has gained traction as it was able to hold over the 200-DMA last week. Now it sits at multi-month highs. It will also be the last member of the Family to join back into a bullish phase since the initial crash. (The bullish phase is identified when the price is over the 50-day moving average and the 50-DMA is over 200-DMA.)
Going forward into the rest of the week, watch for Transportation (IYT) to hold around 213 or the more recent all-time high until Monday. Also watch Retail (XRT) to see what that does around 55. Small Caps, or the Russell 2000 (IWM), failed to close above the old all-time high at 173.39 after making a new one on the open. With the dollar and the yields rising, Gold sold off hard.
But also note one major potential scenario we are already waiting to materialize. That is, with rising commodity prices and a more confident consumer, increasing shortages of supply and demand, plus an inflationary if not stagflationary environment - the market will not like that, especially if the central banks are less accommodative.
- S&P 500 (SPY): Broke all-time highs but was not able to hold them. Needs to get back over 358.75
- Russell 2000 (IWM): Watching to hold the gap
- Dow (DIA): Still holding a decent amount of the gap. Needs to get back over 292.36
- Nasdaq (QQQ): 280 support
- KRE (Regional Banks): New multi-month high.
- SMH (Semiconductors): 191 support
- IYT (Transportation): Watching if can hold around 213
- IBB (Biotechnology): Closed just over yesterday's low of 136.72. Can it hold? Or will it break lower to the 50-DMA?
- XRT (Retail): Can it get back over and hold 55 area?
Director of Trading Research and Education
Assistant Director of Trading Research and Education