D&D Note (9.1.2020) ~ Markets Rally On First Day Of The Month With Zoom up 40% ~
The Futures market fell overnight causing markets to gap down upon the open but then all major indices rallied throughout the day.
The S&P 500 and NASDAQ hit new all time highs led by the stay at home stocks and tech stocks.
Ultimate stay at home stock Zoom rallies 40% today after reporting blowout earnings last night after the bell.
Tesla sells off after stock split down -3.33% today.
Apple continues to rally following the stock split up 4.20% today.
Keep in mind stock splits DO NOT create any value. A reader commented on yesterdays daily note “will this time be different for Apple due to Robinhood?” Analysis from Wall Street today shows that the near term momentum in Apple can keep the stock inflated for the coming trading days to weeks despite the valuation being very stretched (meaning the stock has become very overvalued).
While true many people on trading apps like Robinhood are major buyers of AAPL the retail investor in large, and specifically Robinhood, do not create enough volume to really move the market. 80% of all trading volume is done by algorithms. So the run up in the stock is due to institutional buying but with the knowledge small investors are most likely going to buy at these all time highs. Therefore they can run up the price of the stock, sucker more people to buy, then the algorithms will reverse and take everyones money.
As soon as D&D sees any weakness in daily trading in Apple we actually will be taking profits. As while the stock has always been our #1 holding, it has become too large of a weighting and we need to reduce the position while still maintaining it as our largest holding.
As you saw with the price action today in Tesla, the odds and history show that a stock will selloff post a stock split if it has run up into the split. It’s the same for earnings, if a stock runs up into a quarterly earnings call the company can beat but still have the stock selloff.
White House chief of staff Mark Meadows says state and local aid biggest hurdle blocking a new fiscal stimulus deal. Meaning Democrats wanting to provide state and local cities aid is stalling Republicans from making a deal. Just like people lost revenue during pandemic so to have city and state governments. Less traffic equals less toll revenue, no tourists means less revenue, as just two examples.
Bridgewater Associates, the world’s biggest hedge fund, says the U.S. economy will need over $1 trillion in new additional funds due to Coronavirus.
Warren Buffet spends $6 billion on Japanese stocks as he diversifies his portfolio on a global basis and Japanese stocks are at low P/E ratios that can’t be found here in America.
Trump doctor says he has not had a stroke or mini stroke or heart emergencies.
Labor Department says job growth expected to sharply slowdown over next decade.
DOW up 0.76%
S&P 500 up 0.75% (3526.66)
NASDAQ up 1.39%
VIX down -1.10% to 26.12
Oil up 0.73% to $42.92 a barrel.
Gold down -0.09% to $1976.90 an ounce.
Dr. Fauci debunks theories of low CDC Covid-19 death toll, confirming there have been more than 180,000 people who have died from the virus in the U.S.
Global Virus cases: 25.59 million+
Global Virus deaths: 852,985+
U.S. Virus cases: 6.07 million+
U.S. Virus deaths: 184,517+
~ Dave James / Principal Trader and Market Strategist