E Market Briefing For Monday, July 20

Special report: 'global' urgency rises amid biotech shuffle

Aside sector rotation - in this incredible time of sharp individual stock movements; the Indexes generally maintained a high-level trading range without greater drama. I am clear that this has been achieved as we've moved into some of the Industrial or basic economic stocks; while they faded some of the overpriced super-cap stocks.  

Of course Covid remains the biggest challenge; whether it's vaccines, drugs, or yet again an incredibly hard-to-believe shortage of PPE. It's not just interdependence as does exist between the U.S., China and Europe; but in some cases basic delusion. I would say that wishful thinking if fine; but can't be the core policy of leadership. And it's not now; but even the debates surrounding it can be mind-boggling. Onward ...  

  

This afternoon there's another revelation; two actually. Iran comes clean (no choice as every knows); as a third of Iran is apparently infected... or worse... given officials everywhere tend to underplay the stark reality seriousness of the pandemic. And in China, a 'wartime footing total lock-down' has been declared in Xinjiang's capital Urumqi; and it's a very poor area of China.  

  

And definitely, with charts like the NDX (100 largest NASDAQ stocks) in dramatic ascending wedge patterns, things were ripe for a setback. But at the same time 'strategists' would have told traders to try holding S&P 3200 for just a bit longer if they could; hence the shuffle into conservative basic stocks.  

What's wrong with that? Nothing. Except that includes lots of small banks, small oils and so on, as well as sectors that indeed are depressed, but will likely see lots more failures especially if this persists. Now of course 'affirmation' of a truly efficacious (a proven reliable vaccine, or therapeutic) drug would lift all those; and that's been over the course of this entire outlined historic pandemic-controlled market environment, a backdrop to being ultimately optimistic, provided these 'solutions' to anxiety; not just to business, appear soon. We can get to the Fall (and as Dr. Fauci concurs, at least some sort of 'available' vaccine); but that would require supportive governance.

It's going to be very tricky; there's the political aspect as Goldman notably points to in a suggestion of a 12% market vulnerability should Biden prevail in November; as well as failure to recognize that if the mainstream market is 'heavy' and Covid not at that point contained; well wouldn't that direct even more focus toward biotechs? In my opinion it's possible until there's a clearer picture of which treatments, not just a couple of viable vaccines. will be the dominant features of addressing this global pandemic, which has seen lots of mistakes made by leaders in many countries; not just the U.S., not just the U.K., and certainly including WHO, and China's horrendous mistake for their own people too, by trying to cover-up or minimize the early stages.

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