Heading into Friday the S&P 500 and Dow Indexes had posted their biggest three-day move since 1982, including their biggest post-election rally in 120 years on Wednesday and three gap-up opens in a row. On Friday the indexes held tight as the NASDAQ Composite Index found support off its intraday lows on heavy volume. In most cases, individual stocks have mimicked the indexes by posting deep, v-shaped rallies off the lows of the prior week within choppy longer-term price ranges. While we are happy to be long alternative-currencies and Chinese EV names, the rest of the market may need some time to clarify a bit more in the wake of a tumultuous election week.
The Market Direction Model (MDM) switched to a NEUTRAL signal on Monday, November 2nd. The uncertainty that prevails concerning a number of key factors suggests cash is the best place to be for now in terms of market timing. While a stimulus package is long overdue, such stimulus has become more politicized than ever. It is just a question of when the next stimulus package is passed. In the meantime, the election outcome may remain uncertain as Trump may take this to the highest court in the land. Should such occur, a sharp, short correction in the major averages would not come as a surprise. Even if Trump concedes defeat without a fight, Biden is bad for both the economy and stocks with his higher tax plans which could weigh on the major averages. If social unrest deepens due to the election outcome, markets may suffer. If there’s proven voter fraud, that could also spur deep social unrest. We could have a repeat of the 2000 election where there is no definitive president elect for some weeks. That said, the stock market which fell during this period of uncertainty which lasted a few weeks was already in a downtrend, so the uncertainty seemed to only add mild selling pressure at that time.
Focus List Stocks Expected to Report Earnings this Week: None.
Chinese electric vehicle makers were on fire this past week. The big-stock leader in the group, Nio (NIO) has gone parabolic in a move that looks near-term climactic. We originally reported on the stock in mid-October when it posted a buyable gap-up at around the $25 price level. It has rallied 73% in just under four weeks since then, an extremely profitable, high time-value trade.
Tesla (TSLA) held support at its 50-day moving average on Friday as volume dried up sharply to -63.2% below average.. This creates a voodoo long set-up at the 50-day line using the line as a tight selling guide.
The alternative-currency theme remained robust this week as Bitcoin charged to its highest levels since 2017. The Grayscale Bitcoin Trust (GBTC) pushed to higher highs right into the end of the week and is now in a severely extended position where the 10-day moving average must now play catch up before a new potential entry/add point can occur.
Precious metals shot higher on Thursday as both the Sprott Physical Gold Trust (PHYS) and the Sprott Physical Silver Trust (PSLV) posted buyable gap-up type moves that cleared their 50-day moving averages. Pullbacks to the 50-day line would offer lower-risk entries from here.