With the markets swinging up yesterday and Friday, it seems that last week's ride lower in the markets may have been a dip rather than a downturn. Yesterday, the U.S. markets closed as follows: Dow 27,584, up 410 pts, S&P 500 3,352, up 53 pts and Nasdaq 11,118 up 204 pts. Will these levels hold? Currently market futures are flat to down: Dow -0.17%, S&P 500 -0.19% and Nasdaq 100 -.29%. Asian markets closed the day slightly up, save for the Hang Sang which closed down -0.85%. Currently European markets are flat to down with the FTSE trading around -0.75% lower and the Dax -0.65%. Continuing concerns over COVID-19 and anxiety surrounding tonight's first US Presidential Election debate no doubt contributors to today's jitters.

TalkMarkets contributor Declan Fallon in Bounce Stalls Despite Morning Gaps looks at recent market activity through a technical lens and is not relaxed. Below are his opening and closing remarks, along with the S&P 500 (SPX) chart.

"Friday's rally offered a promising open with a gap higher, but there was no follow through on these gains. In the case of the Nasdaq, there was a close above the 50-day which also picked up the 20-day MA but if the gap is to register as a true 'breakout gap' it cannot close. There was a 'buy' trigger in On-Balance-Volume to go with today's gain. The index is still outperforming Small Caps as it looks to build on its leadership role as the primary home for funds. 

"Monday's gain in the indices formulated the basis for a swing low by providing an additional support level on today's gap; there is now the gap and Thursday's low to lean on. I'm still not hugely confident of this acting as a major swing low with the election so close, but rallies climb walls of worry - and the election is a big worry. "

So what sectors are looking good as the end of Q3 approaches? Rod Raynovitch takes a look at Bio-Tech, Pharma and Healthcare companies in Biotech Stock Playbook In A Choppy Momentum Market and gives us a heads-up on some of his current picks. His current outlook on these sectors is summed up in 3 lines:

"A) Bull market in biotech intact with considerable volatility. B) “Pure-play” vaccine stocks are hard to trade. C) Make sure your portfolio has diagnostic stocks."

Raynovitch has picks in four segments of the above sectors. Some of his picks are as follows, read the article to get the full view.

1. Core large cap Bio-Tech and Pharma (Dividend and Growth): "Picks are Abbvie (ABBV), Bristol-Myers (BMY), Merck (MRK), and Roche ADR (RHHBY). Astra Zeneca (AZN) and GlaxoSmithKline (GSK) for more vaccine weighting. Add Johnson and Johnson (JNJ) for vaccine and general healthcare weighting."

2. Diagnostic related stocks: "Quidel (QDEL) should do well but it is a momentum stock that has to be played accordingly.Our best pick Genmark Diagnostics (GNMK) returned 300% and we have taken some profits. We also like Hologic (HOLX) as a core infectious disease play. Our new pick is Orasure (OSUR) which could deliver a breakthrough rapid test for COVID using saliva."

3. Breakthrough technologies and innovation: "Gene therapy is a potential breakthrough treatment and we have provided updates on Editas Medicine (EDIT) and CRISPR Therapeutics (CRSP) but currently have no positions.Our latest trade in sequencing is Pacific Biosciences (PACB), a trade and a long term hold."

4. Vaccines: "A difficult sector to trade which is why we favor going with large biopharma companies that have vaccine products in later stage clinical trials such as JNJ and AZN. We have traded the pure plays such as Moderna (MRNA) and Novavax (NVAX). But for example look at Inovio (INO) down in pre-market because the FDA delayed its Phase 1/2 trails because of lingering questions."

In a TalkMarkets Editor's Choice column, Simon Lack tells us in The Smart Money In Pipelines, that we should take a look at what is going on in the natural gas sector as smart money like Berkshire-Hathaway (BRK-A) is taking a foothold there.

"Berkshire Hathaway’s (BRK-A) $10BN purchase of Dominion Energy’s (D) natural gas pipeline network last month was welcomed by some investors as confirmation of the inherent value in the sector. The natural gas outlook offers more clarity than for crude oil."

As Lack is sometimes wont to do, he devotes several paragraphs as to why other segments in the Energy (XLE) sector are less favorable to natural gas (UNG) but suggests that if 8% growth is a strong incentive for Warren Buffet, it might behoove us to take a look as well.

"Berkshire Hathaway has quietly become the sixth biggest operator of natural gas pipelines in America. Buffett presumably sees many years of predictable cashflows from these assets, offered at a cheap price. The smart money is here."

Personal Finance and Real Estate converge in Ironman's article, U.S. New Home Market Cap Highest Since August 2006. Recently, we have posted several articles discussing the (surprising?) robustness of the U.S. new housing market in the shadow of COVID-19. Ironman makes note of two disparate but related data points regarding U.S. new home sales; 1) the market cap of new homes sold in the U.S. has risen to $30.6 billion (the highest since 2006) and 2) the median price of a new home has fallen to $312,000 from a high of $343,000 in 2006. The explanation for a higher market cap amid falling prices is that the number of new homes sold continues to increase. Ironman notes the following:

"The preliminary data for the months from April 2020 through August 2020 suggest the number of new home sales is rising at one of the fastest paces on record...we won't be able to confirm if its the fastest until later this year." 

Below are market cap and new home price charts for a visual look at these statistics:

TalkMarkets contributor Kathy Lien, writing in Decision 2020 – Everything You Need To Know About Making Money From The Election, discusses the U.S. Presidential Election and how we might win (or lose) in the market during the current race. Here are a few of her insights:

"Election Night Tips - If you are looking to make money on election night, there are a few important lessons to remember. The first move may not be the real move but when the moves get underway, they will be big. Given how long it takes for the poll results to come in, when the first move begins, it could last two to three hours. However once the clock strikes midnight on the eastern seaboard and the outcome is more certain, even if it’s a near term stalemate, the real move of the day will emerge and that could carry over into European and NY trade. Currencies will track the moves in equities."

"Trump vs. Biden – Who’s Better for the Markets? -  We know that historically sitting Presidents normally win re-election with Jimmy Carter and George W. Bush being the only post-war exceptions. However, they rarely win when stocks fall 3 months into the election and when there is an impeached President. Trump is both so it will be interesting see what matters. Thankfully, for investors, history is on our side. Since 1928, the S&P 500 ended positive 17 out of the last 23 presidential election years or 74% of the time with an average annual return of 7.1%.

Election years are also good for the Dollar Index irrespective of the party winner. Over the past four decades, which covers eleven Presidential election cycles, the Dollar Index appreciated 9 out of those 11 election years. This year may be the exception as it would require a dramatic fourth-quarter rally for the dollar index to turn positive. The trend of election-year performance is less pronounced for USD/JPY as shown in the table below but the downtrend of EUR/USD is strong. This suggests that regardless of who wins in November, opportunities may be had being long dollars." (UUP)

Here's the chart:

That's our contributor's round-up for today. Looking ahead to tonight's Trump-Biden face-off, I leave you with these quotes from election debates gone by:

“We can no longer afford to be second best. I want people all over the world to look to the United States again, to feel that we're on the move, to feel that our high noon is in the future.” - Jack Kennedy, 1960 (Nixon-Kennedy Debate).

“Who am I? Why am I here? I'm not a politician.” - James Stockdale, 1992 (Vice-Presidential Debate, 1992 Election).

Have a good week.