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Week Ahead: Expect Equity Gyrations, Even After New Bullish Records; Lower USD

By Investing.com (Pinchas Cohen/Investing.com)Market OverviewDec 06, 2020 08:48AM ET
www.investing.com/analysis/week-ahead-expect-equity-gyrations-even-after-new-bullish-records-lower-usd-200546972
Week Ahead: Expect Equity Gyrations, Even After New Bullish Records; Lower USD
By Investing.com (Pinchas Cohen/Investing.com)   |  Dec 06, 2020 08:48AM ET
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  • Record COVID cases, deaths and hospitalizations in the US
  • Concurrently, major Wall Street benchmarks all hit new highs
  • Treasuries sold off; dollar slide continues

Even after the four major US indices all hit new records on Friday, equities are expected to keep gyrating chaotically in the week ahead on continually flipping market sentiment. The catalysts? Rampant COVID-19 outbreaks that will pressure stocks by driving new lockdowns, versus hopes that a new government stimulus package will boost the US economy along with shares.

On Friday, a single day record for new cases was set in the US, with 228,407 fresh diagnoses nationwide. That followed Thursday’s new record of fatalities, 2,879 deaths, with the number of coronavirus patients admitted to hospitals across the country surpassing 100,000. President-elect Joseph Biden had already warned of a dark winter, and the US's top infectious disease official, Dr. Anthony Fauci, previously warned that “January is going to be terrible.”

As intensive care units in California are reaching peak capacity, the state's Governor has issued stricter stay-at-home orders affecting Southern California and the San Joaquin Valley, a well as the Bay area, which includes San Francisco. The orders will go into effect on Sunday at 11:59 PM local time.

Benchmark Convergence Exceptionally Bullish Vs. Bearish Data

Still, the S&P 500, Dow Jones Industrial Average, the NASDAQ Composite and the Russell 2000 each closed at new all-time highs, the first time since January 2018 that all four indices made new records on the same day. Even the tech-heavy NASDAQ 100—which recently endured a selloff, as investors dumped previously leading tech shares in favor of lagging value stocks—registered a new record close, though it didn’t achieve an all-time high to finish out the trading week...that occurred on Thursday, together with the S&P 500 which then hit another record on Friday.

Such 'harmonized convergence' is considered exceptionally positive, since each benchmark confirms the others' bullishness.

SPX Daily
SPX Daily

The S&P achieved less than half of its symmetrical triangle’s implied target, leaving room for momentum to run the price up to 3,900 before it would lose steam.

All of which is particularly ironic given that at the close of the trading week, the Labor Department's monthly nonfarm payrolls report revealed that jobs growth for November increased less than anticipated, by 245,000, from October though 469K had been eyed, and the unemployment rate slid 0.2% to 6.7%. The participation rate declined as well, indicating that a greater number of Americans are no longer in the labor force.

Markets boosted by hopes of quantitative easing as weekly and monthly data plummet indicates traders are celebrating a weakening economy, as they count on a short-term quick fix from the Fed. On the other hand, President-elect Biden characterized the read as “grim” and called on Congress to approve new stimulus since “there’s no time to lose.” Though recent market history demonstrates no correlation between political rhetoric and economic events, Friday's results would indicate that investors bought into it this time.

More 'stimulus-speak' came from House Speaker Nancy Pelosi, who insisted “there is momentum” by lawmakers from both sides of the aisle on a $908 billion bill. She said she and Senate Majority Leader Mitch McConnell talked about attaching a stimulus package to an omnibus spending bill the two parties are each ironing out to avoid a government shutdown come on Dec 11.

Will ongoing coronavirus woes solidify expectations for another fiscal aid package, driving traders to bid up stocks to new, as-yet-unexplored heights or will there finally be a breaking point on a stark economic outlook? We can't know, of course, particularly if you add Fedspeak and fresh vaccine news to the mix. One thing is almost certain though: anticipate a bumpy ride ahead.

As stocks soared, investors dumped Treasuries, pushing yields, including for the 10-year note, to their highest levels in nine months.

UST 10Y Daily
UST 10Y Daily

The disappointing employment numbers stretched the horizon on the Fed’s all-time low interest rates, triggering the selloff. Rates were buoyed to 0.973, the highest since Mar.19, along their rising channel.

The dollar extended its decline, suffering the worst weekly performance in five weeks. If more money is pumped into the economy, the value of the USD would be watered down.

DXY Weekly
DXY Weekly

The dollar dropped for the third week in a row, after completing the return move of a H&S continuation pattern. The 50-Week MA, which already crossed below the 100-Week MA, is making its way to the 200-Week MA.

Gold jumped last week, in another twist after it hit its Aug. 8 all-time high.

Gold Daily
Gold Daily

The precious metal is now back above the 200 DMA and back into a pattern, which means it could retest the top, above 1,900.

A report from Bloomberg sees Bitcoin hitting $50,000 in the new year. Alternatively, NYU Stern School of Business Professor Nouriel Roubini believes Bitcoin has no fundamental value and thinks the cryptocurrency's price is being manipulated.

BTC/USD Daily
BTC/USD Daily

The digital currency has been rising over the weekend, regaining most of Friday’s 4.1% loss, after nearing the $19,891 all-time high registered on Dec. 12, 2017. After BTC/USD achieved last week's target, its MACD and RSI are now providing sell signals.

Oil gained 1.4% on Friday, its third straight advance, for a total gain of 3.8% after OPEC+ finally reached a deal to increase production in 2021, albeit more gradually than planned.

Oil Daily
Oil Daily

WTI provided an upside breakout to complete the falling flag, bullish after the preceding sharp rally and a signal for another leg higher.

The Week Ahead

All times listed are EST

Sunday

22:00: China – Trade Balance (USD): 53.50B anticipated for November vs 58.44B in October.

Monday

10:00: Canada – Ivey PMI: seen to decline to 51.5 from 54.5, returning toward contraction mode.

18:50: Japan – GDP: expected to surge to 5.0% from -7.9% previously, on a quarterly basis.

Tuesday

5:00: Germany – ZEW Economic Sentiment: forecast to jump to 46.0 from 39.0.

7:00: US – EIA Short-Term Energy Outlook

Wednesday

10:00: US – JOLTs Job Openings: came in at 6.436M in September.

10:00: Canada – BoC Interest Rate Decision: forecast to remain unchanged at 0.25%.

10:30: US – Crude Oil Inventories: expected to show a significant drawdown of -2.358 million from -0.679 million barrels previously.

Thursday

2:00: UK – GDP: seen to slump to 0.5% MoM from 1.1% previously.

2:00: UK – Manufacturing Production: anticipated to remain steady a 0.2%.

7:45: Eurozone – ECB Interest Rate Decision: rates currently at 0.00%.

8:30: US – Core CPI: predicted to have edged down in November to 0.1% from 0.2%.

8:30: US – Initial Jobless Claims: expected to move higher, to 725,000 from 712,000 last week.

Friday

8:30: US – PPI: likely to slide to 0.2% from 0.3%.

Week Ahead: Expect Equity Gyrations, Even After New Bullish Records; Lower USD
 

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Week Ahead: Expect Equity Gyrations, Even After New Bullish Records; Lower USD

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Comments (9)
Ryan Grandinetti
Ryan Grandinetti Dec 07, 2020 7:17AM ET
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Everything is open Ken & has been for 6 months, unemployment rate in Tampa is unde 3% ie jobs are plentiful. Schools are 100% open. Fl UI is under 4%, hospitals are not flooded with patients, hospitals wait time is under 5 mins. sounds like you do not live in FL & not a real investor. mortality rate is still 1/8 of 1% those are facts Ken
Ken Udenze
Ken Udenze Dec 07, 2020 1:36AM ET
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@Ryan, I work in hospital and live in Tampa Florida, the stats on COVID is terrible. The stock market is not correlated with the economy. The free food center close to my house on 56th has been very busy.Please protect yourself and family! Help is on the way and hopefully, we now have a president that is willing to lead.
Ryan Grandinetti
Ryan Grandinetti Dec 07, 2020 1:36AM ET
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everything is open Ken, unemployment rate in Tampa is unde 3%. Schools are 100% open. Fl UI is under 4%, hospitals are not flooded with patients, hospitals wait time is under 5 mins. sounds like you do not live in FL & not a real investor. mortality rate is still 1/8 of 1% those are facts Ken
Ryan Grandinetti
Ryan Grandinetti Dec 07, 2020 1:36AM ET
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reread my original comment Ken, this reflects my statistics. only Dem states that are CLOSED have high unemployment etc, if these states were to open National unemployment rate would hover around 3%. UI rate nationwide is 6.5% at current. it's the lagging left behind states that are suffering due to politics not covid
Ryan Grandinetti
Ryan Grandinetti Dec 07, 2020 1:36AM ET
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that food pantry on 56th st is always busy especially around this time of year along with the rest of east Tampa. Nothing new to see here Ken
Bella Gartner
Bella Gartner Dec 07, 2020 1:36AM ET
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Biden hasn’t done anything in 50 years other than inrich himself and he is willing to lead what a joke 🤡
Premier Investments
Premier Investments Dec 06, 2020 9:48PM ET
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This is a plethora of really good info. Thx Pinchas!
Pinchas Cohen
Pinchas Cohen Dec 06, 2020 9:48PM ET
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Pleasure, Premier.
Ryan Grandinetti
Ryan Grandinetti Dec 06, 2020 7:33PM ET
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the economy is booming in FL, not seeing any real covid issues locally in Tampa metro area... Starting to believe Trump this was a scam to steal the election.. Covid has an extremely low mortality rate less then 1/8 of 1% . Markets have figured this out lol
Ryan Grandinetti
Ryan Grandinetti Dec 06, 2020 7:33PM ET
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California & NY lockdowns are a way to bring in socialism . which is destroying those areas sad
Evan Ault
Evan Ault Dec 06, 2020 1:02PM ET
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Gyrations = volatility = quick profit opportunities. Bring it, just be smart, exit while you're ahead, and enjoy the volatility plays.
New Jazenevd
New Jazenevd Dec 06, 2020 1:02PM ET
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It is true, though opportunities for swing trading are quite limited at the moment. Market pushed so much up that it is difficult to find any good buying targets, while swinging requires both buying and selling.
Max Sp
Max Sp Dec 06, 2020 1:02PM ET
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New Jazenevd untrue. There’s a huge paying growth stocks selections out there, unreal, but cash in soon as made a reasonable profit and ehen the correction will arrive buy the dip lowerage your longs averages.
Dec 06, 2020 12:38PM ET
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if markets want to repeat march its okay for me, overvaluations are on same levels like dotcom, it needs to end somewhere, the yields could maybe bring speculation bout higher rates. anyway stock market is so hard diverged from reality it is madness we see earnings last week salesforce beat earnings but yet sold cause earnings are far below their price, a lot of stocks have this 1 by 1 pinchas, apple also started the downfall in february with their warning ;), anyway good analysis.
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New Jazenevd
New Jazenevd Dec 06, 2020 12:38PM ET
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Being ok with market crash is not a sufficient reason for the crash. It would have to be something else, more tangible reason, and it is hard to find any reason that could cause repeat of the crash so soon.
Evan Ault
Evan Ault Dec 06, 2020 12:38PM ET
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overvalued now, sure... overvalued once you factor in the next decade worth of massive inflation to pay for all these "relief" bills? still yes, but less so... 🤣
Dec 06, 2020 12:38PM ET
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Kent Beason  yes but cmon do u notice how much ahead markets are now looking its more then a year at least way to much
Santiago Jaramillo Villegas
Santiago Jaramillo Villegas Dec 06, 2020 12:38PM ET
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Thanks for the comment, I would add to look out for fundamentals.... Less performance, more money circulating, dxy down, more money seeking speculations = volatile, stimulus packages going to spending ending up increasing at some point tech companies... While anti liberty lock downs end up ******the economic tissue, small and medium businesses...The printing money scheme will, if continued, erode the faith and credit of the usLet's hope the Covid (not implying doesn't exist) distraction ends up quickly so we can analize the current and future value generation of tickets, and discuss those things... Good luck to all this week
Santiago Jaramillo Villegas
Santiago Jaramillo Villegas Dec 06, 2020 12:38PM ET
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Thanks for the comment, I would add to look out for fundamentals.... Less performance, more money circulating, dxy down, more money seeking speculations = volatile, stimulus packages going to spending ending up increasing at some point tech companies... While anti liberty lock downs end up ****the economic tissue, small and medium businesses...The printing money scheme will, if continued, erode the faith and credit of the us
New Jazenevd
New Jazenevd Dec 06, 2020 9:18AM ET
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Rumors about stock price gyrations are slightly exaggerated. Market disregards any and all negative factors and lockdowns, aka closed barber shops in California, are unlikely to change it.
Pinchas Cohen
Pinchas Cohen Dec 06, 2020 9:18AM ET
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I don't know anything about rumors. That's my personal expectation.
Dec 06, 2020 9:18AM ET
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this complete market is pumped by optimism headlines & fake data all over the place, pretty sad if u can only gain on this.
New Jazenevd
New Jazenevd Dec 06, 2020 9:18AM ET
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Pinchas Cohen  Take it easy, just tried to paraphrase Mark Twain.
New Jazenevd
New Jazenevd Dec 06, 2020 9:18AM ET
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 Gains cannot be sad.
Jyoti Tavhare
Jyoti Tavhare Dec 06, 2020 9:15AM ET
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100% anti Bacteria of bat is a success ful vaccine of corona minus 100% and plus 100% is 100% success ful vaccine
Jyoti Tavhare
Jyoti Tavhare Dec 06, 2020 9:12AM ET
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I can't trade in this market for some month.. it's okay I will give free ly suggestions to us govt about corona vaccine.. all vaccine r same.. like rabies.. anti snake and now a days corona.. rabies vaccine made by.. dog's tooth.. poison.. converted in anti poisonous rabies.. vaccine.. same anti snake.. same for corona anti bat ..its hidden in body of bat.. 99% anti bacterial material unsuccessful because of 1% bacteria that's why corona vaccine.. dela
Andrew Allen
Andrew Allen Dec 06, 2020 9:12AM ET
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wow you must be a virologist! why then are you posting here?
 
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