The market ended mixed last week as Covid related news continued to dominate the headlines. On Monday, Pfizer reported great news on the vaccine front but the number of cases continued to soar across the world which is not fun. The good news on the vaccine front helped a slew of beaten down areas soar as the big money rotated out of the leading areas sending the “stay-at-home” Nasdaq/Nasdaq 100 type stocks lower.

I call this, “The Great Mini Rotation” which happens from time to time in strong bull markets (we see money rotate out of the “leading” areas into the “lagging” areas as the major indices grind higher). The good news is that the bulls showed up and defended the 50 DMA line for the Nasdaq and all the major indices are trading just below their record highs (that’s very bullish action). Stepping back, the market is digesting its very strong rally from March and this will likely pave the way for higher prices in the future. Sitting through tis “correction” is not fun but necessary in order to make big money on Wall Street. Next week, retail stocks will be front and center as a slew of big retailers report earnings. 

Monday-Wednesday’s Action:
Stocks soared on Monday after Pfizer and BNTX announced their Covid-19 vaccine enjoyed a 90% success rate in a Phase 3 study. All of the beaten down areas of the market soared as the high flying stay-at-home stocks pulled back. Stocks were mixed on Tuesday as the Nasdaq/Nasdaq 100 stay-at-home stocks continued to fall as the normal economy stocks rallied. What’s happening here is normal in bull markets and it is something that I call the Great Mini Rotation whereby the market rallies as money rotates from leading groups to undervalued/lagging groups, then back into leading groups after they pull back enough. Stocks were mixed on Wednesday as the Nasdaq/Nasdaq 100 stocks all caught a nice bid and rallied sharply after a two-day shellacking. The bulls showed up and defended the 50 DMA line for the Nasdaq 100 which is a very bullish sign in the near term. Other tech stocks bounced from oversold levels.

Thursday & Friday Action:

Stocks fell hard on Thursday as the number of cases continued to soar all over the world. Elsewhere, Georgia said it will manually recount the votes to make sure everything was counted properly. Sellers showed up after Federal Reserve Chairman Jerome Powell said the U.S. economic outlook remained uncertain even after positive vaccine news from earlier this week. Powell said, “From our standpoint, it’s just too soon to assess with any confidence the implications of the news for the path of the economy, especially in the near term,” Powell said regarding the vaccine. “With the virus spreading, the next few months could be challenging.” Stocks were quiet on Friday as traders digested a busy week on Wall Street.

Market Outlook: Flood The System With Liquidity
The bulls showed up and defended important support (September 2020’s low). Looking forward, as long as that level holds, the bulls remain in control. If all the major indices break below September’s low then odds favor lower prices will follow. Earlier this year, global governments, and global central banks, once again, stepped in with massive rate cuts and other “aid” packages to help “stimulate” both Main Street and Wall Street. That said, longer term, as long as March’s lows hold, the market will likely move sideways to higher. On the other hand, if March’s lows are breached, then look out below. As always, keep your losses small and never argue with the tape.