Dow, S&P 500 Hasten Rally As The USD Snaps - Is The Low In Place?


A bit of hope is holding on as the risk trade has come back to life this week. Despite another nasty open to the week the S&P 500 has held on to Tuesday’s gains and even added some more on Wednesday and, so far in Thursday trade. This happens even as US jobless claims printed in a shocking manner, with 3.2 million printing against the prior week’s 281k.

But – as with everything else in financial markets, context is important; and this shockingly negative print was at least somewhat offset when Treasury Secretary Steven Mnuchin noted that it wasn’t relevant given everything else that the Fed and now Congress have done in the effort of addressing the ongoing issues from a coronavirus-fueled slowdown.

So, at this point, given that there’s been a few days’ worth of gains strung together – the big question is whether the low has yet been put in or whether we’re at a temporary impasse in a longer-term or bigger picture sell-off. And there’s really motive on either side of the scenario: From the angle of fear, we likely haven’t yet seen the worst from the novel coronavirus and many estimates are suggesting that the ‘peak’ is at least weeks away. On the other, both the Fed and Congress have come together with economic stimulus the likes of which the world has never seen.

What can be appropriate for the trader or investor at this point is to identify areas of strength or promise for either scenario. As looked at in Tuesday and again in today’s webinar, the Nasdaq 100 has held up respectably, all factors considered. My colleague, Peter Hanks, discussed this a little earlier today. The Dow, meanwhile, has been hit especially hard as a major constituent of the index (Boeing) is battling multiple negative drivers.

At this point, the Dow has started to test resistance at an interesting spot on the chart. The price of 22,420 is the 50% marker from the 2016-2020 major move; and this is from the same Fibonacci study from which the 78.6% retracement helped to set the low after another brutal Sunday open this week.

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