Commenting on the final deadline for a brexit deal and today’s trading Gorilla Trades strategist Ken Berman said:
Q3 2020 hedge fund letters, conferences and more
Stocks React To COVID Headlines
Stocks continue to react to the latest COVID headlines in a bullish fashion, confirming the strong buying pressure on the Street. Investors had plenty of short-term ‘excuses’ to get out of risk assets this week, but today’s rally confirmed that there are still more players accumulating stocks thanks to the improving long-term economic outlook.
The key sectors continue to diverge in the hectic environment, due to the contradicting short- and long-term market forces. The tech and healthcare sectors and consumer-related issues performed the best, but industrials and materials also finished in the green. The drop in Treasury yields weighed on financials and utilities throughout the day, despite the early strength among lockdown-sensitive issues. The energy sector gave back its morning gains and closed virtually unchanged, and it remains the bellwether of the vaccine rally.
The FDA published a promising report regarding Pfizer's vaccine candidate, confirming its efficiency and safety today, but the serum's final approval is yet to be issued. The number of confirmed cases topped 15 million in the U.S. as infections accelerated again following last week’s dip so the FDA’s approval would be crucial even if its impact on the current wave of outbreaks will be limited. The U.K. already started vaccinations, in line with its plan, and the global rollout is expected to gain steam in January.
The Final Deadline For A Brexit Deal
The final deadline for a Brexit deal is quickly approaching and while today, the U.K. and the EU got closer to securing an organized “divorce”, the risk of a no-deal Brexit is still weighing on investor sentiment. The Great British pound has been on a roller-coaster in recent weeks due to the uncertainty, but a comforting deal could boost the currency and global risk assets in the coming days. The positive COVID trends and this week’s better-than-expected economic numbers from Europe are great news for global growth, and they mean that U.S. equities could soon enjoy international tailwinds.
Barring a stimulus breakthrough, investors could be in for another relatively quiet session tomorrow, as the domestic economic calendar will be low on key releases yet again. The JOLTS job openings estimate could provide some clarity following last week’s mixed bag of job market indicators, while the weekly crude oil inventories number might lead to another volatile session in the energy sector. The Chinese Consumer Price Index (CPI) and Producer Price Index (PPI) will highlight the overnight session but trading activity will likely remain light ahead of Thursday’s European Central Bank (ECB) meeting.
Snowflake's (SNOW, -0.1%) entry to the Nasdaq as one of this year's largest-scale Initial Public Offering’s (IPO), and this month, the stock broke out from its initial trading range, and its market cap topped $100 billion for the first time today. While, from a technical perspective, a lot of the tech leaders of the summer rally have been showing in recent weeks, the fact that Snowflake, a cloud-based service provider saw strong inflows means that the tech bull market is far from being over. The Nasdaq’s new highs have been supported by smaller names from the sector this week, and that’s great news for the broader market as well.
Following a stellar November, small-caps started out December in a quiet fashion, but thanks to the rising odds of a stimulus deal, the Russell 2000 has been spearheading the advance yet again since Friday. The index hit 1,900 for the first time in history continuing its recent historic technical breakout and pushing the most reliable breadth measures to new bull market highs as well. That said, the Russell is now well into overbought territory, being the most stretched since the start of the recovery, so a pullback is in the cards before the end of the year. Stay tuned!
Headlines
- The Dow, the Nasdaq, the S&P 500, and the Russell 2000 all hit new all-time highs again thanks to a promising broad-based intraday rally on Wall Street
- The U.K. officially launched its vaccination program, and the U.S. is on track to start distributing Pfizer’s (PFE, +3.2%) vaccine next week
- The stimulus talks in Washington reportedly stalled once again, but the two sides are still optimistic that a deal can be reached this week
- The seven-day average of infections, hospitalizations, and deaths all continue to climb in the U.S. and the pressure on the healthcare system is increasing
- The Brexit-saga that has been testing investors' nerves could finally be drawing to its end thanks to today's progress between the European Union (EU) and the U.K.
Market Wrap
| Index | G/L | Current level | Year-to- date | 50-day | 200-day |
| Dow | 104 | 30,174 | 5.7% | 28,679 | 26,250 |
| Nasdaq | 63 | 12,583 | 40.2% | 11,687 | 10,156 |
| S&P 500 | 10 | 3,702 | 14.6% | 3,500 | 3,164 |
| Russell 2000 | 27 | 1,918 | 14.4% | 1,673 | 1,461 |
Advancing issues outnumbered decliners by a 3-to-2 ratio on the NYSE today, with 118 stocks hitting new 52-week highs and only 1 stock hitting a new 52-week low, while volume was slightly below average.
Price Action Gauge ******** (reading for 12/08: 81)
Price action improved markedly thanks to today’s broad-based move, which proved that the vaccine rally is well and alive even without a stimulus deal and participation in the rally remains strong despite last week’s slight deterioration.
Oversold/Overbought Gauge ******** (reading for 12/08: 19 Color: green)
Most of the key momentum indicators continue to hit new multi-month highs on a daily basis, meaning that the major indices are getting more and more overbought, but there is still no sign of an imminent reversal.
