While You Were Sleeping

By July 17, 2020Weekly TGIF

I’m going to geek out on some Market data today, but stay with me. I really think you’ll find it fascinating. And don’t jump straight to the end.

Some of the biggest up days for the Stock Market have occurred on news of a possible vaccine. That should come as no surprise. It’s very logical. Perhaps it helps to explain why the Market hasn’t accentuated the negatives on the health front since March. There certainly have been plenty of negative developments in recent weeks, but the Market just hasn’t seemed to care.

There has been a notable shift in sector strength this week. Tech was down 2% on the week, while the S&P gained 1%. Leadership came from the beaten-down industrials, which were up 6% on the week led by FedEx. For the first time in 2 months, Value stocks (+3.5%) beat Growth (-0.75%). Software stocks had their worst week since March. Even Amazon was down 10% from its all-time highs this week, after an absolute monster run.

The rotation into cyclical sectors is healthy and shows that the tape can handle a breather from the Tech Titans. They were way, way overbought. The percentage of S&P 500 stocks above their 50-day moving average exceeded 80% this week in a reflection of expanding breadth and Market participation. This is comforting, but is also an overbought reading. Half the S&P companies were measured overbought heading into Friday. It was merely 14% when the week started. Value played catch-up.

Now this might really surprise you. It surprised me until I did more digging. Since the beginning of May, the S&P 500 has risen over 300 points, a gain of 10%+. However, all of those gains have come overnight, in the Futures Market, when the US Stock Market was closed. During the regular day sessions, the S&P has actually declined.

Case in point, the S&P 500 gained 9 points today to close out the week. However, it opened and closed at the same price, 3224, trading effectively flat for the day. The daily range was pretty tight between 3205 and 3233. The difference was the Futures Market had it already up by those 9 points when the regular session opened for trading this morning.

If you look at the Dow, you’ll see a 62 point decline today. But it actually closed 103 points lower from where it opened trading this morning. The NASDAQ gained 3 points on the day from the opening price, though you’ll see it officially finished up 29. The difference came from the overnight session.

Remember during the crash, all those Limit Down sessions? The Futures Market automatically shut down on numerous occasions after reaching a 5% decline. Those were some disturbing times. Market crashes do that. The opposite was true too. A 5% gainer halted overnight trading as well, which happened a number of times early in the recovery rally.

The thing is, the vast majority of the Stock Market movement has come while you were sleeping; that is, if you were sleeping. There have been many sleepless nights in 2020.

Have a nice weekend. We’ll be back, dark and early on Monday.

Mike

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