A strong US market overnight as market participants chose to shrug off the bad news, the 4.8% US GDP contraction and a $1.7B Boeing loss that leads to it shedding 16k workers and embraced the initial positive trial of the Remdesivir drug and the resilient results of the big techs. Consequently, Dow advanced 532pts and the Nasdaq jumped 3.57% to 8915, now a mere 9.4% from the peak. S&P500 advanced 2.66% to 2939 but could not crack the 2950 level on two occasions during the day.
So this is where we're at now , on the cusp of the 200MA around the 3000 mark.
And with Facebook and Microsoft both reported reasonable results and higher after close, Dow futures are perking up and the S&P500 could well try to move into the 2850-3000 zone tonight. Facebook expressed that the last few weeks in April saw stabilisation in its business while Microsoft reported 15% growth in sales largely due to its cloud business, although cautioning that the effects of COVID19 may not be fully reflected until future periods.
So the night before, US market went lower following Dr Fauci's warning that the virus may be with us longer and last night, market participants became encouraged again with the Remdesivir news as it did before. Findings thus far showed that the drug can be effective in treating early onset patients and reduce recovery time. In the absence of a vaccine, the drug is not a silver bullet and its effects is not fully understood across a wide spectrum of patients nor is it determined by Gilead to be safe for use broadly to address COVID19. application. FDA will probably fast track the approval of the drug without the necessary due diligence process- because this is an emergency. That is a scary thought but we live in unprecedented times and we "have nothing to lose". Yet, the question remains what this prospect will do to social distancing compliance and consumer behaviour.
The Fed didnt have much to say except that we will never have interest rates going higher unless US gets full employment and 2% inflation. Well, full employment won't be back for a long while and 2% inflation is in the not distant future. With that, gold rose in tandem with equities.
Graham Summers has this to share about the 61.8% retracement level which we are approaching
This is the Most Important Chart For Predicting If We Crash Again The market is now approaching “the line in the sand."
That line is the 61.8% retracement of the March meltdown.
As Bill King has noted, a big problem with major market crashes is that they render most technical metrics useless. Put another way, whenever the market drops violently, things like relative strength, MACD, stop working as trading tools.
Case in point, stocks were already extremely oversold in late February 2020, but they dropped another 26% while RSI flatlined. Anyone who used RSI to try to pick a bottom in late February got destroyed. For this reason, one of the few technical indicators that remain helpful after a crash are Fibonacci retracements percentages. These are based on the famous Fibonacci ratio (with the exception of the 0.5% which was simply added by traders for its predictive value).
From a predictive standpoint, historically, most major crashes see stocks retrace 61.8% of the initial decline before rolling over and crashing again. Put another way if stocks CANNOT break above the 61.8% retracement, they are doomed to crash to new lows. As such the 61.8% retracement is “the line in the sand.” ----------------------------------------------------------- As trader Xtrends has noted, during the Tech Crash the NASDAQ retraced 61.8% of the initial decline during a major bounce. It then stopped on a dime and rolled over to crash to new lows.
The same thing happened during the 2008 crash. It’s now in the process of doing the same thing this month. Note that we are slightly above the 61.8% retracement today, but there are still two trading sessions left in the month.
For the Nasdaq, we have already breached it.
A positive start for the ASX is on the cards and probably a broader base one too, and the divorce from fundamentals will have to take a back seat for now as it did in the Nov19-Jan20 monster rally.
