D&D Note (4.17.2020) ~ Remdesivir & Reopening of Economy Propels Markets Higher ~
Immediately when the futures market opened last night markets jumped over 3% on the back of positive trials for Gilead drug Remdesivir and the Presidents “Governor first” reopening guidelines. Although today the President has already contradicted himself by telling three states facing anti shutdown protests to. “Liberate themselves” via Twitter and also got into a spat with New York Governor Cuomo telling him to “Stop talking.”
While the positive trials in Remdesivir are encouraging we still need more data on the drug in wider trials and we still need overall Covid-19 testing in the country for the virus.
Markets gave back some of last nights gains but did rally into the close off the lows of the day. In what is another positive sign its good to see investors willing to head into the weekend long and the markets ending a Friday in the green.
DOW up 2.99%
S&P 500 up 2.68%
NASDAQ up 1.38%
Overall the daily moves in the market still tend to be based on hope for the virus cases to come to an end and the economy reopening. This is starting to change and will continue to change more in the coming weeks when we get more clarity about the actual destruction of the economy via data.
The VIX fell into a 30 handle at 38.07 down -5.14%. This level does still imply a daily move of 2% in the markets.
While a full retest of the March 23 lows is becoming less probable the markets are starting to feel too elevated and are likely to have downward pressure in coming weeks.
A total collapse isn’t likely when markets finally decide to actually price in the epic horrible economic data. Rather a slower churn down in May/June is probable.
Right now this is a FOMO rally, but don’t get caught feeling like you need to buy and missed the opportunity. Investors will have further opportunity in coming weeks and months. Stay invested but also hold onto a cash horde. Just can’t fight the FED now and when markets stop focusing on the virus cases and do price in economic recession that will be the time to begin aggressively buying again.
~ Dave James / Principal Trader and Market Strategist