Commenting on today’s trading in which the Great British pound and other currencies were in focus, Gorilla Trades strategist Ken Berman said:
Today’s session was another major confidence boost for bulls, as the ‘buy-the-dip’ mentality seems to be well and alive on Wall Street. Despite the lofty valuations, investors were eager to jump back into stocks on the first somewhat upbeat reports regarding the coronavirus epidemic, which led to today’s spectacular short-covering rally.
Q4 2019 hedge fund letters, conferences and more
Stocks surged higher across the board today and the major indices finished significantly higher for the second day in a row, thanks to the positive U.S economic numbers and the easing coronavirus-related fears. The Dow was up 408, or 1.4%, to 28,808, the Nasdaq gained 195, or 2.1%, to 9,468 while the S&P 500 rose by 49, or 1.5%, to 3,298. Advancing issues outnumbered decliners by a 4-to-1 ratio on the NYSE, where volume was well above average.
The major indices surged higher this morning and as bulls continued to chase stocks higher throughout the session, the benchmarks registered their biggest one-day gains of the year. Value investors shrugged off Google parent Alphabet’s (GOOG, - 2.5%) revenue miss from yesterday, and the Nasdaq hit a new all-time high in the afternoon, erasing the pullback that was triggered by the coronavirus outbreak. Consumer-related issues, services, industrials, and financials all shined today, and even the battered energy sector managed to bounce back thanks to the improving global sentiment.
Great British pound and currency markets
Today's most important earnings reports were mixed, with ConocoPhillips (COP, - 4.6%) missing both on its top and bottom lines, confirming the bearish trends in the energy sector, but with Disney (DIS, +2.4%) posting encouraging numbers in after-hours trading. Disney's shares jumped higher in the wake of the report, and since the firm's Dsiney+ streaming service already has over 26 million subscribers, the stock could remain bullish. The price of crude oil recovered above the $50 per barrel level, but since the travel restrictions concerning China remain in place, the commodity might only be in for a ‘dead-cat-bounce’.
Tesla’s (TSLA, +13.8%) epic short squeeze might be nearing its end, at least judging by the violent intraday moves that Tesla stock has been experiencing this week. The shares of the company rallied by a whopping 60% in two days, and Tesla was up by more than 300% since October before today's late-session pullback, with the stock's short interest still standing at over 17%. With the company’s financials improving and its battery-related operations showing more and more promise, the fundamental story remains intact, even if the stock’s current rally seems unsustainable.
Economic data ahead
A very busy day of economic releases is ahead of us, but in light of the much better-than-expected ISM manufacturing PMI, bulls might be in for another treat. The ISM non-manufacturing PMI has been consistently outperforming the manufacturing measure, and while analysts only expect a small uptick in the measure, to 55.1, a larger increase wouldn’t be all that surprising. The ADP payrolls number will also be out, two days before the all-important government jobs report, and analysts forecast a reading of 150,000, a sizable drop in comparison to last month’s 202,000 figure.
Technical Corner. Although the relatively weak Dow has been tethering on the edge of a bearish short-term trend change this week, stocks are still bullish from a long-term perspective and most of the key trend indicators are pointing higher. The major indices remain well above their rising 200-day moving averages of 8,272 for the Nasdaq, 3,010 for the S&P 500, and 27,013 for the Dow, and the benchmarks also closed above their steeply rising 50-day moving averages of 3,209 for the S&P 500, 8,973 for the Nasdaq, and 28,427 for the Dow.
The coming weeks could be crucial for the Great British pound and in turn global equities, as currency markets will start to ‘price in’ the effects of the Brexit which just got official over the weekend. The currency drifted sideways before the country’s exit from the European Union (EU) after hitting an almost two-year high against the dollar in December. While the pound fell substantially this week, and GBP/USD pair is still trading above both its short- and long-term moving averages, and should its advancing trend continue, U.S. and overseas stocks could get a long-term boost. Stay tuned!
