[Chart courtesy of MarketWatch.com]

1. Moving the markets

An early 100-point bounce in the Dow turned into a late trounce again with the major indexes accelerating to the downside late in the session. With only 1 day left until a key deadline for an aid package set by Pelosi becomes effective, traders took the lack progress as a bad omen and selling sped up.

Added CNBC:

Tom Block, Washington policy strategist at Fundstrat Global Advisors, thinks it is possible that a deal between the Trump administration and Pelosi can be reached.

“Both sides seem to have an incentive to get a deal done,” Block said in a note to clients. He also added that “the dynamics of the lame duck could be poisonous if Trump loses, or Republicans lose control of the Senate. The safer course of action seems to be to pass a bill now, and if there is a blue wave more stimulus early in 2021.”

While the Dow and the S&P 500 had their worst day since September 23^rd, the Nasdaq logged its first 5-day losing streak since August.

Even though Pelosi and Mnushin were scheduled to talk later today, any potential deal was “not sounding imminent,” according to the Washington Post. However, should the warring parties suddenly come to an agreement, a relief rally would be a foregone conclusion; however, the duration of such would be questionable.

That also brings up the question, as to whether the big tech unwind, charted here by ZH, can be reversed, or not. How about the sliding FANG stocks? Or the skidding banking sector?

More questions than answers…

[Chart courtesy of MarketWatch.com]

1. Moving the markets

The markets took a steep dive right after the opening, with the Dow down some 300 points, after which a slow but choppy ascent pulled major indexes out of the doldrums, but they fell short of reclaiming their respective unchanged lines.

The culprits for the early weakness were the same as yesterday, namely no progress among the warring parties regarding the stimulus package and renewed threats of lockdowns in those areas with most of the new Covid-19 cases.

Reported CNBC:

“Market volatility is set to continue in the weeks ahead as investors brace for a host of uncertainties—the timing of vaccine availability (after a setback for Johnson & Johnson), the size and timing of additional US fiscal stimulus, and the election outcome,” wrote Mark Haefele, chief investment officer of global wealth management at UBS. “The uneven recovery in the US economy also adds to investor concerns as the results season kicked off this week.”

Headlines were in chaos mode adding to market uncertainty. Here are a few I came across:

• WHO Europe Director Says Governments Should Stop Enforcing Lockdowns
• European governments reinstate pandemic restrictions to curb a second wave of the coronavirus.
• Behind The Nasdaq Weakness: Goldman Downgrades Tech To Neutral
• Twitter, Facebook Go Full Tilt Protecting Biden Just Weeks After Execs Join Transition Team
• Senate Judiciary To Subpoena Jack Dorsey After Twitter Suspends Trump Campaign, House GOP Accounts Over Biden Scandal
• Traders Rattled After Morgan Stanley Sees 80% Odds Result Won’t Be Determined On Election Night   

Not helping was the jobless claims report showing that almost 900k Americans filed for first-time benefits last week, which was worse than the 825k expected.

But that’s only part of it with ZH adding this important fact:

So, that’s the reported data – do with it what you will, depending on your agenda – but bear in mind that it is practically useless noise given the fact that issues with data from California, the most populous state, continue to remain frozen as they deal with the massive fraud that permeated their unemployment rolls.

I believe that volatility will ramp up over the next few weeks, which is why I took the opportunity to ease up on our market exposure by liquidating one of our holdings to lock in profits before they might turn into losses.

I think a more measured approach in this highly uncertain environment is advisable. After all, I see the downside risk as a graver danger as opposed to a couple percentage points of gains to be made on the upside—at least for the next 3 weeks.

The insanity is sure to continue.

[Chart courtesy of MarketWatch.com]

1. Moving the markets

Even though the markets started the session on the plus side, early enthusiasm waned, and the major indexes closed in the red for the second day in a row. The losses were modest, and a late day rebound attempt failed to push equities back above the unchanged line.

Weakness appeared to accelerate after Treasury Secretary Mnuchin threw cold water on hopes of a coronavirus stimulus deal being reached prior to the elections.

Added CNBC:

Mnuchin said around midday that getting a deal done before the election would be difficult, adding that both sides were still far apart on certain issues. He also noted, however, that Democrats and Republicans are making progress in some areas.

The latest earnings reports turned out ok with Goldman Sachs beating expectations, while BofA’s report cart received mixed reviews sending the financial sector south, as Bloomberg shows here.

The US Dollar index did an about face and dropped, thereby giving gold a reason to rally with the precious metal gaining +0.53%.

The overall feeling in the markets seems to be one of uncertainty with a “let’s wait and see” attitude prevailing in both bullish and bearish camps.

However, analyst Sven Henrich was spot is with this observation:

The bull case: Nothing matters.

Not debt, not growth, not earnings, not layoffs, not valuations, not forward multiples, not tax hikes.

Keep buying historic valuations because the magic money fairy will keep bailing us out.

I could not have said it any better.