"Successful trading is about finding the rules that work and then sticking to those rules." — William O'Neil
The market turned itself upside down again with a negative expectation breaker following the news of an effective Coronavirus vaccine from Pfizer ( PFE +7.69%) and BioNTech ( BNTX +13.91%). Investors quickly exited stocks that have grown during the pandemic and rushed into companies that have been weighted down such as travel and energy companies. The Nasdaq started with gains in the morning, but quickly turned those gains into losses that never stopped into close.
The previous week was the worst since March, so why not follow it up with the best week since April. The Nasdaq closed the week with +9.01% gains. The index regained all key support levels and tempted the highs of 10/12 where it had previously pivoted down. The change in momentum came as investors realized the “blue wave” they previously predicted would not happen and their would at least be a Republican senate to temper any radical changes proposed by a Democratic Whitehouse.
The Sectors really put on a good show this week along side the back-and-forth election expectations and growing impact of the pandemic.
The morning started with a pullback in the markets but then the indexes, including the Nasdaq rallied back to yesterday’s highs after better than expected employment data. It was not a stellar day of gains like the previous three days, but it was a good pause to cool off from one of the hottest weeks since April.
The Nasdaq continued an energetic rally with another gap up day and big gains on Thursday. The fed left interest rates alone. Although it did not meet expectations, Jobless Claims continued to decline and seemed acceptable in the current context. The election still does not have a definitive winner. Although Biden is in the lead, there is still a chance for the count to turn Trump’s way, or for legal victories in court. The Senate still seems to be going to the Republicans, holding back a “blue wave”.
What a difference a day can make. The Nasdaq reacted sharply to a turn in sentiment toward election results when it became apparent the “Blue wave” would not happen as originally thought. Even as the presidential election remains undecided, it seems that the Republicans will retain control of the Senate, putting a damper on any radical changes in the near-term. The index responded with a gap up and turned in a +3.85% gain on a 12% increase in volume .
It is finally Election Day! And the day brought the pleasant surprise of a positive expectation breaker for the Nasdaq. Yesterday’s trend lines and the indecisive candle pointed to losses for today, but it is good to be wrong sometimes. I set my expectations for the next day, but always be prepared for a break from those expectations, especially during these uncertain times.
The first day of November brought starts off with some more choppy market action as the Nasdaq started in positive, went negative and then back to positive by the end of the day. It was good that the index came up off afternoon lows, but it could just barely get back to the midpoint of the morning highs.
A review of what happened in October with the Nasdaq.
Using the indicator on the big four mega-caps over the past week, especially Friday, gives a clear view of the character of how each performed.
