D&D Note (5.28.2020) ~ Markets Overshot To Downside Now Overshooting To Upside ~
When we have a sudden market crash stocks tend to fall too far to the downside (as we did March 23) and then tend to rise too far to the upside. That is what looks to be happening now.
How far do we overshoot on the Bear Market Rally? Nobody actually knows and while a retest of all time highs is unlikely we can certainly rally up to 3250 on the S&P 500 before markets recalibrate and then correct back down.
There still is a lot of short covering boosting some of the most battered down stocks like airlines.
FOMO also looks to be kicking in with traders rushing to bid up stocks. Usually retail investors tend to buy and sell at the wrong time with selling on lows and buying at highs.
Unemployment data is pointing to the worst of layoffs is perhaps behind us which had helped fuel the rally today. While the worst may be over the next question is how long before we can get the unemployment rate back down.
Continued jobless claims dropped by almost 4 million and was the first decline since the Pandemic started. That means people are going back to work but that number needs to continue to go down week over week.
In the last hour of trading news broke that President Trump will have a news conference on China this Friday. Markets instantly took a leg lower on the headline.
This shows just how fragile this rally is and how big tensions between China and the United States really are.
Markets continued to pair gains into the close with all major indices giving up all the days gains to close in the red (the S&P 500 had been up 1%).
DOW down -0.58%
S&P 500 down -0.21% (3029.73)
NASDAQ down -0.46%
VIX up 3.62% to 28.62
Oil up 1.89% to $33.43 a barrel.
The English Premier League announced they will resume its season on June 17. Games will not include fans in the stadium.
Last night the United States crossed 100,000 deaths due to Covid-19. We continue to see Black Americans making up a disproportionately larger share of deaths.
Global Virus cases: 5.93 million+
Global Virus deaths: 358,067+
US Virus cases: 1.71 million+
US Virus deaths: 101,196+
~ Dave James / Principal Trader and Market Strategist