Another day into the reopening and the market remains confused. The Nasdaq Composite (+0.70%) shot even higher today while the S&P (+0.01%) traded flat and the Dow (-0.45%) dropped.
In other words, big tech keeps rising and not much else has changed. FAANG stocks (plus Microsoft) impressed yet again in today’s uneven trading session.
“The COVID-19 pandemic has reinforced the essential role that technology plays for businesses and consumers, and stoked expectations that the recession could see many of the largest growth companies become even more dominant,” Salvatore Ruscitti, U.S. equities strategist at MRB Partners, said about the top-heavy market.
Typically, rallies following a correction are led by small-caps at first. Then, big-cap stocks get in on the action a little later.
These days, the opposite has been true. With main street in lockdown, tech is taking the lion’s share of the revenue.
Whether that’s enough to keep equities afloat is up for debate.
“I think this part of the bounce was easy to forecast, I think what happens from here again depends a lot on COVID stuff,” remarked hedge fund manager Paul Tudor Jones.
“There’ll be a shift in focus from liquidity issues somewhere down the line to solvency issues. If we don’t find a vaccine or a cure, if we don’t find a much better way of testing at scale […] then I think the market’s going to have a much more difficult time.”
As we’ve been saying for weeks now, the true “eureka” moment for the market will likely be a medical solution. Several vaccines show promise and remdesivir, a treatment solution from Gilead, has been deployed to hospitals nationwide.
But until mass testing is available, Americans might not feel safe leaving home. That’s a big problem for bulls as tentative reopenings across the country slowly proceed.
“The world very much remains on the path to reopening, a process that will accelerate over the coming weeks,” Adam Crisafulli, founder of Vital Knowledge, said in a note.
“There will be a reckoning around the reopening and linearity narratives (i.e. both are too sanguine right now).”
Many investors have bet heavily on gold over the last few weeks, assuming the economy would stumble and inflation would rise in the face of unprecedented government stimulus. And while, fundamentally, that makes sense, gold prices are reaching dizzying heights. A gold “crunch” now seems more likely than another “boom.”
Barrick Gold Corporation (NYSE: GOLD), a gold miner, fell sharply today. The stock peaked in late April, then again in May, forming a double top – a reversal formation.
GOLD has done very well since the market bottomed in March, but now, it finds itself below its 10-day moving average and its bullish trend (represented with the yellow trendline).
Should GOLD fall below today’s low, it might make sense to take the stock short with a trade trigger of $25.50.
The gold/silver ratio currently sits at 109.43. Historically, that’s high, and it means that gold is due for a plunge, silver is ready to rally, or both.
On Friday, we looked at how silver is headed north. Gold, simultaneously, could drop.
Silver is trading for $15.48 an ounce. Gold, $1,695.20.
Making money off two precious metals trades, moving in opposite directions?
Now that would be priceless. Or, at the very least, equivalent to a major short-term gain.
