[Chart courtesy of MarketWatch.com]

1. Moving the markets

The futures market already fluctuated between stimulus pessimism and optimism causing the S&P to oscillate wildly, as this chart shows.

The regular session continued with that volatile theme when, similarly to yesterday, an early rally hit a brick wall with the indexes resembling a roller-coaster ride. The exception was the Nasdaq, which continued its northerly path without interruption, while the Dow dipped in and out of the red during the last couple of hours.

A buying surge into the close assured green numbers all around, with especially Gold sporting a nice comeback.

The sudden plunge mid-day occurred because of house stimulus headlines with Pelosi declaring the difference is ‘not dollars, but value’…

Added ZH:

AS a reminder, yesterday the House had delayed the vote by one day as a concession to the ongoing dialog between Secretary Mnuchin and Nancy Pelosi. However, the fact that the House speaker now plans to ram through the vote confirms what should have been obvious weeks ago- that no agreement has been reached and that no agreement will likely be reached until after the election.

On the economic front, the picture remains mixed at best with the US Manufacturing Survey suggesting that “The Outlook Has Darkened,” according to ZH. The filing for First-Time Jobless Benefits, while slightly improved from last week, still shows an economic environment in trouble. The fly in the ointment is that California announced a two-week pause in the processing of initial claims. Hmmm…

All these questionable numbers have not been lost on Dr. Copper, the metal which often acts as a proxy for the economy, but its latest plunge could serve notice that not all is well, and that it has a long way to fall to catch up with the reality of bonds. Hat tip goes to Bloomberg for this graph.

[Chart courtesy of MarketWatch.com]

1. Moving the markets

After the somewhat chaotic US presidential debate, the future markets headed lower by as much as 1%, with Asian trading being sloppy and choppy, while Europe also headed south.

None of that mattered, as renewed hopes for further coronavirus stimulus pushed the major indexes to higher levels throughout the session in addition to some encouraging economic data. Pending Home Sales soared 8.8% MoM, which was far better than the 3.1% rise expected. This sent the YoY rise in pending home sales to +20.5%, the biggest annual gain since April 2010, according to ZH. Of course, that comes as no surprise given the “tremendously low interest rates.”

ADP Employment also came in better than expectations with a 749,000 increase in jobs in September, which boosted hopes that Friday’s payroll number could come in at close to 800,000.

Today’s surge to higher levels hit a glass ceiling mid-session, when the Mnuchin-Pelosi meeting turned into a dud. Senate majority leader McConnell poured cold water on the rally by declaring that the Senate and House are “very, very far apart” on stimulus talks. He made it clear that they will not come up to the $2.2 trillion number the Democrats were demanding.

The rally hit the skids and south we went but last hour buying prevented the indexes from slipping into the red.

Gold rode the giant rollercoaster by getting pumped and dumped but ending up on the downside, as US 10-year bond yields surged. Could have been quarter-end rebalancing…

In the end, while the quarter was positive for the indexes, equities suffered their worst September since 2011. And now, we’ll be facing the notoriously volatile October—where anything can happen.

According to Bloomberg, on average, the S&P 500 has lost 2.5% in October over the past seven election years (since 1992), the worst performance of any month during that period.

[Chart courtesy of MarketWatch.com]

1. Moving the markets

Today was opposite day. After yesterday’s strong rally fed by enthusiasm over a fresh stimulus deal and new coronavirus vaccines, today’s early bounce hit the skids, as all these fuzzy feelings gave way to the reality that nothing may be accomplished, while pandemic deaths are on the rise in NY.

In the end, equities fell modestly and snapped a 3-day winning streak, but Gold bucked the trend, regained its $1,900 level, and closed solidly in the green supported by a sliding US Dollar and dropping bond yields.

Anxiety and uncertainty prevail giving tonight’s upcoming debate. Added CNBC:

Traders also looked ahead to the first debate between President Donald Trump and Democratic nominee Joe Biden set for Tuesday night. Some Wall Street analysts believe the first debate of this cycle could be more consequential for the markets than most debates, with a clear victory by one candidate possibly creating significant volatility.

“Everyone knows what they’re going to get with Trump, for better or worse,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group. “The question then is what will Biden deliver. If Biden doesn’t kick any balls in his own net, then the market will take that as a win for him.”

For sure, we will see a market reaction tomorrow no matter what the outcome, however, the magnitude of it is the big unknown.

[Chart courtesy of MarketWatch.com]

1. Moving the markets

Last week’s sour market sentiment started to swing in the opposite direction on Friday with equity bulls sensing a turnaround, despite election uncertainty. Even though September has been a down month, it was not as bad as originally feared by traders, hence the sudden outlook that the bull may have more room to run.

The futures started things on a positive by tracking solid gains in European and Asian markets, as optimism reigned that the recent selloff was overdone. The dollar slipped and bond yields rose reversing the recent trend.

Also assisting the buoyant mood and providing a boost to equities were comments from Speaker Pelosi that a last-minute coronavirus aid deal may still be a possibility. That news alone put a bottom under the ramping markets, and we never looked back, as a steady climb pushed the major indexes solidly in the green.

I took the opportunity to add some equity exposure to our holdings, which I consider a fairly low-risk proposition due to our Trend Tracking Indexes (TTIs) having been stuck within striking distance of a potential “Sell” signal two trading sessions ago thereby lessening the downside risk.

Today’s advance was broad based and not just focused on tech, as the S&P 500 managed to keep up with the Nasdaq for most of the session, while global stocks outperformed the domestic main indexes for a change.

This surge could be the beginning of a new bullish phase, or simply be an outlier event. Since no one has any idea how this will play out, we will continue to track our trailing sell stops and execute them, should the need arise.