October 27, 2020

Investors Become Nervous, U.S. Elections In Focus

Investors Become Nervous, U.S. Elections In Focus

Stock Market Today

There are only seven days left until the U.S. presidential election, and there are still no signs of a second stimulus package. There is no doubt that investors have become a lot more nervous now than before. This is why we experienced an intra-day drop of 900 points for the Dow Jones yesterday.  

The House Speaker, Nancy Pelosi and the U.S. Treasury Secretary, Steven Mnuchin failed to reach a stimulus deal yesterday. All of this is happening while the U.S. is facing a record number of new coronavirus cases.  The renewed surge in coronavirus cases has made investors even more anxious.  

The Asian stock market followed the footsteps of the U.S. stock market and closed sharply lower. The HSI index fell by 1.16%. The Korean Kospi index also moved lower by 0.38%, while the Nikkei index declined 0.39%. The Shanghai index dropped by 0.37%.

Dow Jones and S&P 500: Market Breadth

The Dow Jones’ market breadth took a severe beating yesterday. 63% of the Dow Jones stocks traded above their 200-day moving average. This is a change of -4% from a day earlier.  

The S&P 500 stock breadth came under selling pressure yesterday. 67% of the shares traded above their 200-day moving average. This is a change of -5% from a day earlier.  

Dow Jones Futures Today

The Dow Jones futures are trading modestly higher by 50 points today. Today is all about the U.S. Core Durable Goods Orders m/m, and the forecast is for 0.3% against the previous reading of 0.6%.

The bar is already set low, and if the actual number fails to match the forecast, it is highly likely that we may see more trouble for the U.S. markets.

Later today, we also have the U.S. consumer numbers, another important set of economic readings for the U.S. economy. The forecast is for 102.1, while the previous reading was 101.8.

The Dow Jones futures took a serious beating yesterday, and the Dow Jones’s price not only fell below the 50-day SMA on the daily time frame, but the Dow also crossed below the 100-day SMA.

However, bargain hunters quickly stepped in when the Dow Jones dropped over 800 points yesterday, and this helped the Dow to move back above the 100-day SMA.

Traders will be looking at the current price and the 100-day SMA very closely. The immediate support level for the Dow Jones is at 27260, and the resistance is at 28199. 

The S&P 500 index, which represents the wider stock market, also fell below the 50-day SMA on the daily time frame.

Market participants believe that there could be more pain ahead if the price continues to trade below the 50-day SMA. The RSI, the Relative Strength Index, has moved away from the overbought zone, but we are still not near the oversold zone. Any reading of the RSI above the 70 mark is classified as overbought, and any number below or close to 30 is known as oversold. Currently, the RSI is at 46. The immediate support for the S&P 500 is at 3332 and resistance is at 3475.

Stock Market Rally

The S&P 500 stock index faced a panic mode yesterday – the index declined by 1.86%. The industrial stocks led the index lower, 8 sectors out of 11 closed lower. 

The Dow index took a serious beating yesterday; the Dow stocks moved the index lower by 2.29%. 29 shares of the Dow fell, and 1 closed higher. 

The NASDAQ composite, a tech-savvy index, advanced 0.63% on Friday. 

S&P 500 Leaders and Laggards: Abiomed and Royal Caribbean

Abiomed stock contributed the biggest gain, soaring 2.45%. Royal Caribbean stock was the largest drag; it fell by 9.65%. The S&P 500 stock index is up 5.3% so far this year.

Dow Jones Leaders and Laggards: Apple and Salesforce

Apple stock advanced higher by 0.01% and was the biggest mover for the Dow, while Salesforce stock declined 3.41%, the biggest drag for Dow Jones Industrial Average index.