​​​​​​​Nasdaq Blasts Higher As Congress Confirms Biden’s Win

​​​​​​​Nasdaq Blasts Higher As Congress Confirms Biden’s Win
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Commenting on Nasdaq blasting higher and Congress confirms Biden’s victory and today’s trading Gorilla Trades strategist Ken Berman said:

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Q3 2020 hedge fund letters, conferences and more

​​​​​​​Nasdaq Blasts Higher

Today’s session was yet another confirmation of the underlying bullish trend as investors gobbled up stocks, looking past the worries regarding the Democratic sweep. Shorts got annihilated yet again following only one bearish session on Monday, and even the relatively weaker Nasdaq managed to hit a new all-time high today, as the bullish stampede continues on Wall Street.

Jeffrey Aronson Crossroads CapitalAccording to data compiled by hedge fund data group HFR, the gap between the top and bottom performing hedge funds hit the highest level in 2020 for 11 years. Q3 2020 hedge fund letters, conferences and more The data shows that for the 12 months to the end of November, the gap between the top Read More

The main sectors diverged substantially yet again, but compared to yesterday’s session, the picture was much more promising for bulls. While most cyclical issues were notably weaker than on Wednesday, tech stocks, financials, and communication services more than made up for that, and the large-cap benchmarks fared well, with the Dow, the S&P 500, and the Nasdaq all hitting new all-time highs. Real estate stocks and utilities were hit hard by the surge in Treasury yields, which could also limit the rally in the sector.

Trump Pledges An Orderly Transition

The unprecedented and tragic disruption of yesterday’s confirmation of the electoral college vote wasn’t enough to stop the rally in stocks, and today, President Trump pledged an “orderly transition”, giving a major confidence boost for bulls. The objections raised by some Republican lawmakers were rejected and the vast majority of both chambers of Congress voted for the confirmation of the results. From an investment standpoint, the end of the uncertainty and the promise of another round of stimulus are both bullish catalysts, despite the remaining political risks.

The number of new COVID cases spiked above the pre-holiday levels both globally and in the U.S. in the past 24 hours. While the delayed reporting could be the main reason behind the spike, fears of a renewed surge in infections persist, and the number of hospitalizations and fatalities are also higher-than-ever. The new variant of the virus might be behind the accelerating spread in several European countries, and the World Health Organization (WHO) warned of a possible “tipping point” due to the current dynamics, which could weigh on risk assets in the coming weeks. 

Job Market’s Weakness

The government jobs report and especially non-farm payrolls will be at the center of attention tomorrow, in terms of economic releases. Despite the renewed coronavirus stimulus hopes the job market’s weakness could weigh on the market in the coming weeks, should the bearish ADP payrolls number be a good indication of the current trends. The consumer credit report will also come out in late trading while German industrial production and the Eurozone unemployment rate will highlight the overnight session.

Since the COVID bottom in March, solar stocks had probably their best period ever, almost tripling, on average compared to their pre-pandemic levels. The TAN (TAN, +5.4%) ETF, one of the most popular solar funds hit a new all-time high yesterday, as investors flocked into the score in the wake of the election results. While from a short-term technical perspective, the sector looks stretched, the ETFs breakout signals that the bull market in renewables could be one of the main themes of 2021.

The 10-year yield hit its highest level since June, above the widely watched 1% resistance, so the next leg higher in rates could already be under way. The 10-year yield remains well above its 200-day moving average, which is also turning higher for the first time since early 2019, suggesting a tectonic shift in the bond market. While long-term, rising yields could cause problems for stock investors the current trend of normalization is a sign of trust in the economic recovery, and rates could push higher together with equities in the coming months. Stay tuned!

Market Wrap

Index G/L Current level Year-to- date 50-day 200-day
Dow 212 31,041 1.4% 29,505 26,945
Nasdaq 327 13,067 1.3% 12,185 10,632
S&P 500 56 3,804 1.3% 3,610 3,263
Russell 2000 41 2,099 6.2% 1,826 1,527

Advancing issues outnumbered decliners by a 3-to-1 ratio on the NYSE today, with 293 stocks hitting new 52-week highs and only 2 stocks hitting new 52-week lows, while volume was well above average.

Price Action Gauge ******** (reading for 01/07: 81)

Price action improved significantly yet again today, and the broad push to new all-time highs was once again led by small-caps, meaning that the rally’s foundation remains rock solid.

Oversold/Overbought Gauge ******** (reading for 01/07: 47 Color: green)

The key momentum indicators turned higher across the board in the wake of today’s rally., and the major indices are still overbought according to them, but investors remain hungry for risk.

Headlines

  • Stocks finished broadly higher with Nasdaq leading the charge as the domestic political tensions eased and the major indices all hitting new record highs
  • Congress confirmed Joe Biden’s election victory despite the objections and the violent riots in Washington
  • New jobless claims came in at 787,000 slightly lower-than-expected but the surge in the Challenger job cuts estimate suggest continued pressure on the job market
  • The number of new COVID infections hit a new record globally with the U.S. tally of confirmed cases crossing 21 million
  • Treasury yields hit new multi-month highs yet again, as investors bet on a swift, stimulus-fueled economic recovery

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