Commenting on the contested election fears and today’s trading, Gorilla Trades strategist Ken Berman said:
The Fears Of A Contested Election
The major indices are all trading higher at midday as last week’s severe selling pressure eased ahead of tomorrow’s elections. Despite the rally, volatility remains very high amid the political uncertainty and the raging pandemic, and stocks are likely to experience wild swings in the coming days. The fears of a contested election are still weighing on investor sentiment, and while the Volatility Index (VIX) is slightly below last week’s levels the tension is still apparent on the Street.
In economic news, the ISM manufacturing PMI provided a massive positive surprise hitting its highest level since late-2018 with a reading of 59.3. On a negative note, construction spending slightly missed expectations, but the outlook for the manufacturing sector continues to be bright even considering the spike in the number of COVID cases. Thanks to the bullish PMI and the overnight rally in global risk assets, the Dow is back above its September low, together with the S&P 500 and the Nasdaq, and that gives hope to bulls that a tradable bottom is near.
Dow: 26,875, + 374 or 1.4%
S&P 500: 3,296 + 33 or 1.0%
Nasdaq: 10,950, + 38 or 0.4%
Russell 2000: 1,559, + 21 or 1.4%
Market breadth has been relatively strong this morning, with advancing issues outnumbering decliners by a 5-to-1 ratio on the NYSE at midday. 18 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 hovering around their daily VWAPs (Volume-Weighted Average Price) throughout the morning session, pointing to a mixed and choppy afternoon. The key cyclical sectors have been leading this morning’s rally, thanks to the blockbuster manufacturing PMI, with defensive issues and stay-at-home stocks showing relative weakness due to the improving sentiment, but it’s too early to conclude that bulls are out of the woods. Stay tuned!