Short covering started the rebound but FOMO caused acceleration at the close. We always hear about sell the news events but there are also buy the news events. The first two days of the week were calm and low volume as investors and traders placed their bets for election results. Apparently quite a few were short because they did not believe in historical trends or thought there was going to be a tsunami of conversions to democratic held positions. When disaster did not strike and gridlock seems inevitable the race was on to cover those shorts. At the same time, there was a strong case of FOMO hitting the markets. (Fear of missing out) Everyone seeing prices jump then raced to buy something, anything.
The Nasdaq 100 big cap index surged 3% because those stocks were the most oversold. The FAANG stocks had a near record day. Even Apple gained $6 as shorts there were forced to cover as well.
The Dow saw heavy buying in the tariff sensitive stocks that had been beaten severely over the last several months. CAT, BA, MMM were at the top of the leader board but there was only one loser and that was PG. That is a super defensive stock that has been rallying in a down market. Money was rotating out of defensive issues.
The problem with a 545-point short squeeze is that all the stocks you would want to buy blew through resistance and packed on the points. The option premiums surged out of sight and there is no way to buy any of those stocks today. Anyone buying calls on stocks with big gains today will likely lose money when the sugar rush fades.
Thursday is a Fed rate decision and statement. It is entirely possible the Fed could say something the market does not like. The yield on the ten-year is holding at multiyear highs and a hawkish Fed statement could send it soaring and that would be market negative.
Rather than try to force a new position on a stock that exploded higher today, I think we are better off to wait until the post election short covering is over and the Fed statement is behind us. No new positions today.
New positions are only added on Wednesday and Saturday except in special circumstances.
NEW BULLISH Plays
No New Bullish Plays
NEW BEARISH Plays
No New Bearish Plays