After all those earnings reports, the circus in D.C. with Congress ripping into mega-cap growth companies, and the Federal Open Market Committee (FOMC) gathering, Friday’s session came down to progress on the next round of fiscal stimulus. When it looked as if Congress would leave town without any deal, early gains in the market rolled over and began to gather speed to the downside.
Before reaching terminal velocity, word came out that those elected officials would hang around town over the weekend to try to hammer out a package.
The market reversed, as investors were able to focus on things such as earnings and guidance.
Follow the bouncing S&P:
- Opens at 3270 +24 points
- Slumps to 3220 -49 from the high
- Rallies to 3741 +51 points from the session low and high of the day
S&P 500
Always Follow Volume
The rebound in the S&P 500 was impressive on Friday, but volume was the tell-tale sign. A ton of buying happened in the last thirty minutes of trading. This was a Friday session with a lot of unknowns going into the weekend, but fence-sitters panicked. Many had no choice as the tenure of the rally began to change. It’s easy to look at this market from the March lows, and think the rally is overdone.
However, looking at major indices’ year-to-date and event, the NASDAQ rally could claim more to the upside, as the Dow Jones Industrial Average (DJIA) was still in the negative.
I was extremely impressed with Friday’s volume, which was the highest of any session of the month. The session was the perfect proxy for the rally. On the way down, stocks drifted on exceptionally light volume. When the needle turned up, buyers emerged.
To see the chart, click here.
Key Technical Hurdles
There was some resistance around 3,276 for the S&P. The big test comes with a retest of the new high at 3,386.
The Dow Jones Industrial Average is just a basket case with too many oil stocks, the wrong tech stocks, and no Amazon (AMZN), Facebook (FB), or Alphabet (GOOGL). Nuts!
- The index sees its big upside test at 27,572
- There is no resistance for the NASDAQ Composite
Fund Flows
Funds continue to migrate to bond funds at the expense of equities, although the rate of rotation is slowing. If this ever reverses, the stock market would go parabolic.
To see the chart, click here.
Portfolio Approach
We are going long a Consumer Discretionary stock this morning and lowering Cash to 1 in our Hotline Model Portfolio. If you are not currently a subscriber to our Hotline service, contact your account representative or email Info@wstreet.com to get started today.
Today’s Session
Eli Lilly (LLY) announced a late stage Phase III trial of its Covid-19 vaccine in conjunction with nursing homes. This is a huge step and the first that has focused on the most vulnerable part of the population.
Winners are Winning Big
Back on June 5th, there were 189 winners in the S&P 500 with an average gain of less than 13%. Coming into the week, there are 189 winners in the S&P 500 with an average gain of 20%.
Winners keep running.