A Pre-Election Stimulus Deal Is Now All But Impossible

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A Pre-Election Stimulus Deal Is Now All But Impossible
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Commenting on the likelyhood of a pre-election stimulus deal and today’s trading, Gorilla Trades strategist Ken Berman said:

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Q3 2020 hedge fund letters, conferences and more

Pre-Election Stimulus Deal Is Now Impossible

The major indices are all trading significantly lower at midday following a gloomy overnight session and a steep morning selloff on Wall Street. The global COVID situation further deteriorated over the weekend and the number of U.S. infections also hit a new record, jumping above 80,000 two days in a row. Even the weekly-average of new cases hit a new high, with the Midwest being the epicenter of the outbreak. The fact that a pre-election stimulus deal is now all but impossible also added to the bearish pressures this morning, even as the high-level talks are set to continue this afternoon.

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In economic news, new home sales declined unexpectedly to an annualized 959,000 units following four months of increasing sales, but the current reading is still the second-highest since mid-2007. The German IFO Business Sentiment Index missed expectations in pre-market trading, which has been weighing on global risk assets as well. The large-cap benchmarks all dropped back to their 50-day moving averages, with the Dow plunging clearly below its short-term indicator, so the coming days will be crucial from a technical perspective.

Market Wrap

Dow: 27,659, - 677 or 2.4%

S&P 500: 3,395 - 71 or 2.1%

Nasdaq: 11,369, - 180 or 1.6%

Russell 2000: 1,604, - 37 or 2.3%

Market breadth has been relatively weak this morning, with decliners outnumbering advancing issues by an almost 9-to-1 ratio on the NYSE at midday. 31 stocks hit new 52-week lows on the NYSE and the Nasdaq, while 27 stocks hit new 52-week highs. The major indices have been trading below their daily VWAPs (Volume-Weighted Average Price) for most of the morning session, pointing to intraday selling pressure. The key sectors are all trading deep in the red at midday, but consumer-related stocks and the “risk-off” healthcare and utilities have been showing relative strength, while cyclical issues and tech stocks fared worse-than-average, confirming the broad bearish shift. Stay tuned!

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