foxex: Is it Really Over?

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Chart Advisor | Focus on the Price

By Gordon Scott, CMT

Monday, May 18, 2020

1. Large cap stocks break new highs

2. Walmart earnings up next

3. The end of COVID-19?

Market Moves

The Russell 2000 index futures (RTY) were trading near limit up even before the market opened today, and they continued higher through the session. Yet the fact that the S&P 500 index (SPX) also closed at new two-month highs showed that the rally has now broadened. Investors showed reinvigorated hope that the economy will soon rebound and that stocks will trade higher through the end of the year.

The chart below compares State Street's S&P 500 index ETF (SPY) with iShares 20+ Year Treasury Bond ETF (TLT) to measure which way money is flowing, either towards stocks (green candles) or towards bonds (red candles). This indicator also broke new highs and shows the volatility regions above the price compressing, signalling that investors are showing less fear with each passing day.

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Walmart Earnings Up Next

When retail stocks open for trading tomorrow it is a good bet that they will rise higher. That's because both Walmart (WMT) and Home Depot (HD) will report earnings before the bell. This likely double shot of good news coming on the heels of today's market rally will likely be met with enthusiasm by investors. Of course, there is no telling what stocks will actually do ahead of time. But the current circumstances set up an important marker.

Because these companies are expected to report well (if you've shopped at either of these stores in the past month you know why), chart watchers need to be on the lookout if their shares drop. That would be an unexpected move, and such surprises are some of the best information traders and investors can use for understanding market sentiment. The chart below compares the top three brick-and-mortar retailers that should get a bump when Walmart reports.

Expedia Stock Could Gain Ground After Earnings

Who Is Winning the COVID-19 Vaccine Race?

The End of COVID-19?

Markets opened strongly on the news that drug maker Moderna (MRNA) released trial reports showing that all 45 out of 45 participants in their study were forming antibodies against COVID-19 after six weeks. Enthusiastic investors bought up stocks on the hopes that the economy will soon return to normal.

In fact, some chart watchers may find it interesting that the indexes weren't trading even higher on such news. This likely reflects investor expectations that it will still take time to reverse the economic effects of the quarantine. But those eager to take a blue-pill-like solution to get everything back to normal should recognize why MRNA shares were up more than twenty percent in today's trading.

The Bottom Line

Stocks shrugged off the previous week's dip and resumed their upward rally today after news broke that Moderna's vaccine showed positive results. With Walmart and Home Depot reporting before the market opens, the rally should likely continue. If not, chart watchers should take note since it may signal stocks have hit resistance.