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Markets Close Mixed Due to Mild Vaccine Concerns

Mild coronavirus vaccine data concerns and other headwinds weighed on the markets on Thursday as the indices closed mixed.

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News Recap

Markets Traded Sideways Due To Mild Vaccine Concerns

In the short-term, there will be optimistic days where investors rotate into cyclicals and value stocks, and pessimistic days where there will be a broad sell-off or rotation into “stay-at-home” names. However, in the last two sessions, markets largely traded sideways.

In the mid-term and long-term, there is certainly a light at the end of the tunnel. Once this pandemic is finally brought under control and vaccines are mass deployed, volatility will surely stabilize, and optimism and relief will permeate the markets. In fact, CNBC personality Jim Cramer said that beating COVID-19 would feel like “the end of prohibition.” Stocks especially dependent on a rapid recovery and reopening such as small-caps should thrive.

Markets will continue to wrestle with the negative reality on the ground and optimism for an economic rebound in 2021. While more positive vaccine news continues to trickle in day by day, there is still discouraging COVID-19 news, economic news, and geopolitical news to consider. Amidst the current fears of a double dip recession with further COVID-19-related shutdowns and no stimulus, it is very possible that short-term downside persists. However, it’s encouraging that Pelosi and McConnell are talking again. If a stimulus passes before the end of the year, it will certainly boost sentiment.

Due to this tug of war between good news and bad, any subsequent move downwards will likely be modest in comparison to the gains since the bottom in March and since the start of November. It is truly hard to say with conviction that another crash or bear market will come. If anything, the constant wrestling match between sentiments will keep markets relatively sideways.

Therefore, to sum it up:

While there is long-term optimism, there is short-term pessimism. A short-term correction is very possible. But it is hard to say with conviction that a big correction will happen.

S&P 500 Pulls Back

After two straight record closes, the S&P 500 somewhat pulled back on Thursday. There are a few indicators that show that the S&P could face some near-term volatility, however, these indicators have largely stabilized this week. The S&P’s stabilization in volume for one is a big deal. After volume sharply declined from November 9th, there were doubts on the sustainability of the rally, but it has largely been stable over the last few weeks.

Low volume, especially a sharp drop in volume, means that there are fewer shares trading. Lower volume also means less liquidity across the index, and an increase in stock price volatility. Therefore, a stable volume trend means that volatility may decrease. Again though, this is a market that trades largely on news and sentiment, so anything could change.

The RSI of 65.03 also keeps the S&P in a HOLD category. Although the RSI has not moved much this week, be very wary if it exceeds the overbought level of 70 - because it’s approaching – however, sideways trading should mute this.

With this data, further pullback from these levels would not be a shock… but another surge based on good news would not be a shock either. Because of all of the uncertainty, a HOLD for the S&P is an appropriate call. For an ETF that attempts to directly correlate with the performance of the S&P, the SPDR S&P ETF (SPY) is a good option.

The premium analysis this morning will showcase a “Drivers and Divers” section that will break down some sectors that are in and out of favor. Dear readers, do me a favor and let me know what you think of this segment! Always happy to hear from you.

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Thank you.

Matthew Levy, CFA

Stock Trading Strategist

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All essays, research, and information found above represent analyses and opinions of Matthew Levy, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Matthew Levy, CFA, and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Levy is not a Registered Securities Advisor. By reading Matthew Levy, CFA’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading, and speculation in any financial markets may involve high risk of loss. Matthew Levy, CFA, Sunshine Profits' employees, and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

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After graduating with a Bachelor of Science in Economics from the University of Victoria in 2010, Matthew developed a passion for helping clients meet their financial freedom through strong, risk-adjusted portfolios. Formerly, he was responsible for managing and co-managing over $600MM in cumulative assets for private households and institutions. Matthew also undertook and completed his CFA® charter in 2015, a rigorous professional credential program promoting the highest standards of education, ethics, and professional excellence in the investment profession. One of the many things Matthew is aiming to accomplish with his newsletter is to help you personally navigate financial markets as a professional would, by offering general market overviews over different time frames, highlighting leading and lagging sectors within the market, and (hopefully) captivating macroeconomic updates as necessary. If you want an excellent way to grab an edge over the market, sign up for the Stock Trading Alerts. You’ll stay up-to-date with his analyses and the ability to reach out with any specific questions or updates you would like to see in future newsletters. Sign-up is a few clicks away, and Matthew looks forward to helping you on your investment journey.

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