What a difference a night makes
On Tuesday 10 Nov 2020 11.23pm, I emailed Clients my latest post titled 'What a difference a night makes'.
I've actually prepared a 'Quick update' writeup post Biden's victory, for release on Monday 9 Nov evening but in the end did not get to post it due to the sudden surge in US futures market (Dow futures was up 1700 pts) last night. The details of that writeup is as follows:
'This past week's 'Election' and/or 'NFP' (nonfarm payroll) rally in the S&P500 Index (SPX) has indeed clouded the immediate bearish outlook I have, as mentioned in my 5 Oct 2020 writeup - https://www.thom-ng.com/post/looking-ahead-beyond-the-correction
The strong 4-day SPX rally in the past week has caused the bearish correction pattern to morph into a Triangle, which is a mild correction or consolidation pattern. And with the price action currently in the upper segment of the Bollinger bands, it is possible for price to stretch towards the top of the Bollinger Band at 3585SPX (see attached 6 Nov chart).
As mentioned in my whatsapp message to a Client dated Friday 6 Nov 2020 (see attached image), I would like to see how the SPX pans out post election to reassess the immediate outlook again. Stay tuned!' . Then what a difference a night makes. On 9 Nov SG time late night, Pfizer's announcement of a more 'concrete' vaccine caused the US markets to go literally over the top and SPX price action to bullishly break out of its triangle pattern. While peer group review of the vaccine is sparse, this technical breakout on the Charts to a new all time highs do have BULLISH undertones - it only shows us how much liquidity is there on the side ready to pounce back into the market should conditions be right. So over here, I will make 4 simple points for your perusal: . 1. It may be possible that my original 2870-3050 correction framework & target may be harder to materialize. As much as I would like SPX to reach those levels so that we can scoop up some good bargains, you must always remember - 'we cannot change the cards we are dealt, just how we play the hand'. . 2. It is likely we should see some form of a pullback over the next few weeks due to the glaring weakness in Tech (more below). However, be prepared to 'Buy on Dips'. . 3. Some may say that since a more concrete vaccine has been found, there may not be a need for a major stimulus package in the US. Let me put it this way: A) If vaccine not found or delayed > thus need for major stimulus package + Fed promise of low rates + potential helicopter money > stocks rally B) If vaccine found > thus no need for major stimulus package + Fed promise of low rates + potential helicopter money > stocks (also) rally As you may see, whatever outcome you choose, Mr Market wins. :) . 4. It has been glaring that tech stocks have not been that enthusiastic in last night's big rally. This IMHO is a normal rotational move as Tech has been a clear beneficiary of a Covid world (think ZOOM, Netflix, Gaming stocks, 'stay-at-home' stocks). When the storyline reverses, funds flow out of Tech into value or old economy stocks such as banks & airlines. No sweat actually BUT I will admit weakness in Tech will probably be a short to medium term drag to the overall market due to Tech's high weightage in SPX, ie no full swing bull market yet.
In layman's terms: IMHO, Tech weakness is likely a normal rotational move. Look to buy on dips / weakness for SPX. . Live Long & Trade Well! . Thank you & regards . Thomas Ng, CMT Principal Trading Representative 首席股票经纪 www.thom-ng.com . #plsreaddisclaimer #chartforillustrationonly #spx10nov20 #spx6nov20 #beyondthecorrection #quickupdatetoaquickupdate #bullmarket #befluid #wytant #livelongandtradewell Chart: tradingview.com'