Week-In-Review: Very Busy Week For Stocks
Stocks ended higher as investors digested a very busy week on Wall Street. The week started with a very heated Presidential debate, stocks rallied, then President Trump/the First Lady tested positive for Covid-19, and the last jobs report before the election came in mixed. Stocks fell on Friday but still ended the week mostly higher. That’s a very bullish sign. My friend and legendary investor Jim Roppel said it best: Trump has a bad cold, but the Fed is still injecting trillions of dollars into the economy. Trump will likely recover and the market is acutely aware of that fact. Until the major indices break below support the bulls remain in clear control.
The market gapped up nicely on Monday as the rally continued from the prior week. The rally was broad-based as the major indices rallied nicely and just about ever sector rallied. Stocks closed lower on Tuesday as the major indices struggled near their respective 50 DMA lines. C19 deaths topped 1,000,000 which is not ideal. On the political front, the first debate between President Trump and Democratic nominee Joe Biden is now behind us. On the stimulus front, Pelosi and Mnuchin renewed talks for another Coronavirus stimulus package. The Debate was very heated and futures were up but fell by the time it was over. That didn’t stop the bulls because the market ripped higher on Wednesday and didn’t look back. The rally was broad based and clearly showed the market has voted and expects a bullish outcome in November – irrespective of who wins.
Thursday & Friday Action:
On Thursday, the market opened nicely higher but sellers showed up as hopes faded regarding another stimulus package. Economic data was mixed as U.S. manufacturing activity slowed in September. The purchasing manager’s index fell to a reading of 55.4, down from from 56 in August, according to the Institute for Supply Management. Stocks were quiet on Friday as investors looked ahead to earnings season. Late Thursday night, President Trump and the First Lady tested positive for Covid-19. Futures fell over night and into Friday morning. Before Friday’s open, the last jobs report before the election was released. The report showed that nonfarm payrolls rose by 661,000 in September, missing the Street’s estimate for 800,000. Meanwhile, the unemployment rate fell to 7.9%, which was lower than the the Street’s estimate for +8.2%.
Market Outlook: Flood The System With Liquidity
In September, we saw just about every major Central Bank reiterate their dovish stance which should bode well for asset prices- instead they are falling. That could be the first sign that “something has changed.” Earlier this year, global governments and global central banks, once again, stepped in with massive rate cuts and other “aid” packages to help “stimulate” both Main Street and Wall Street. As long as March’s lows hold, the market will likely move sideways to higher. On the other hand, if March’s lows are breached, then look out below. As always, keep your losses small and never argue with the tape.