Covid-19 numbers are growing, and it doesn't feel like the markets care. With election uncertainty dissipating and the likelihood of a split congress, equity futures remain relatively unfazed.
It's debatable whether or not you can classify last Monday's price action as a blowoff top after the Covid-19 vaccine announcement was made. A blowoff top usually indicates either a shift in trend, momentum, or sentiment and market bulls are still making a better case than the bears right now.
Even after the considerable rotation we saw from investors dumping large-cap tech stocks and moving into small-caps, the S&P, Dow, Russell, and Nasdaq futures are all still hovering around their all-time highs right now.
Elections, Stimulus, and Covid Vaccines
Ready to get funded?
|
|
|
Buy the Rumor Sell the News
It’s pretty typical to see two stages of price movement after a significant piece of news is released. The first stage is the initial knee-jerk reaction, followed by stage two, which usually occurs once the reality of the situation sets in. Last week’s new release was Pfizer’s announcement of a Covid-19 vaccine with a 90% success rate in preventing the virus. And we saw all saw what happened.
The emotional reaction displayed by investors sent small-cap stocks soaring while tech stocks took a hit. As the reality set in that it’s still going to be a while before most of us actually have access to the vaccine, stocks turned and started to tumble. This reality was confirmed yesterday (November 16) when Moderna, and American biotechnology company, announced positive results for another possible vaccine and the markets didn’t react nearly as violently as they did last week.
Next Moves
Right now, it appears that investors are banking on a new stimulus plan coming in a timely fashion, no new tax reforms, and for the election to run smoothly from here on out. And, with the CBOE Volatility Index, known as the VIX, calmly nestled below 25, it would appear a continuation of the stock market rally is a fairly safe bet.
This could all fall apart any minute though. Trump has shown no sign of conceding, and there are rumors flying around of Biden addressing student loan debt in his first 100 days in office, which will most certainly involve a tax increase.
Headlines remain “risk-on” for the time being.
Trade Well!