Through last night’s session, the ES was fading slowly, heading into what looked like a red opening.
Then the market exploded higher. When I saw this spike, which corresponded with the release of the advance Q1 GDP number, I was puzzled. What on earth could the GDP for Q1 have to do with such a big movie? (As an aside, the estimate was even worse than anticipating, coming in at a negative 4.8%).
As you surely know by now, it had nothing to do with the GDP number, which was deemed irrelevant. Instead, once again, it had to do with Gilead (symbol GILD) being halted on pending news. It appears there is some encouraging news with respect to their Covid vaccine. Thus, everything in the world went ripping higher.
I find this a little perplexing for the longer term. Allow me to lay out my simple-minded logic:
- The economy was chugging along prior to Covid;
- The virus attacks, and the economy is shuttered, and the market (all to briefly) falls hard;
- The world’s central banks throw trillions of dollars at the market to support it during this time of crisis;
- Equities are far more highly valued now, based on fundamentals, than they were before the crisis;
- The reason they are valued so high is one and only one reason which no one sane denies: all those trillions of bucks of support.
Thus, if this thing is cured, and the world can actually head back to normalcy – – -doesn’t that support go away? Just thinking out loud.
Another event that buoyed sentiment was the reaction from Alphabet (GOOGL) and their earnings report.
As with all things, however, such a move must be taken in context of the larger picture.
Today, of course, is (GILD notwithstanding) all about the Fed, which announces 2 hours before the close and whose press conference is 30 minutes later. I’ll be keeping a particular eye on the bond market (ZB shown below) which has the prospect of a breakout above the right triangle pattern, whose top I’ve tinted in green.
As I keep mentioning, I’m relatively light, although I’m confident I’ll lighten up even more at the opening bell. Good luck to everyone out there.
