Daily Commentary: November 05, 2020

Jeremy Engelbrecht1Option Commentary

Post Election Rally Is Strong – Time To Buy

Posted by Pete Stolcers on November 05

Yesterday the market surged higher after the election and it was able to close above the 50-day moving average. The election results are still unknown and the market has shrugged off uncertainty. This is a testament to a strong bid and the S&P 500 is up 60 points before the open today. Investors are piling back into the market and we are likely to challenge the all-time high before year-end.

ISM services and ISM manufacturing were both strong and initial jobless claims continue to drift lower. ADP reported 300K fewer jobs than expected in the private sector and that could weigh on the jobs report Friday.

The Coronavirus is spreading. AstraZeneca will start shipping its vaccine around Christmas and this is could really turn the economy around. Mitch McConnell stated that a stimulus bill is the top priority when Congress returns and that will fuel this market rally.

Earnings season has been in line with reduced expectations. Q4 will also be light due to the recent wave of the Coronavirus, but investors don’t seem to care. Valuations are rich at a P/E of 23, but 0% interest rates are forcing investors out on the risk curve. They have to own equities to have a chance at generating a decent rate of return.

The FOMC statement will be released today, but it is a non-event. Extremely dovish comments are expected.

The presidential outcome might not be known for a few weeks, but Republicans will retain control of the Senate. This means that the Trump tax cuts are likely to remain and the market likes that.

Swing traders can start selling out of the money bullish put spreads. In last night’s weekly swing trading video I highlighted 4 solid prospects. Swing traders can also try to buy a half position of SPY at $346. I don’t like to chase and the market will have to pull back for us to get filled. There is still a fair amount of uncertainty and I believe that we will have opportunities to buy pullbacks.

Day traders should wait for a pullback this morning. Once support is established, buy stocks with relative strength. Tech stocks have a strong bid and they will be your best prospects. Yesterday we saw a powerful rally early in the day and we saw a steady pullback late in the day. Expect nice ranges and volatility. I prefer to trade from the long side.

Support is at SPY $343.50 and resistance is at $349. There is a downward sloping trend line at SPY $349 and a close above it would be very bullish.

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