'Upside Surprise': Stock Market Update For The Week Ahead

The Past Week, In A Nutshell

What Happened: Last week ended positively on news that a Pfizer Inc PFE and BioNTech SE BNTX COVID-19 vaccine was more than 90% effective in preventing the virus in participants without evidence of prior infection.

Remember This: “We believe the huge upside surprise in earnings may get more attention as more political uncertainty clears,” said LPL Financial Equity Strategist Jeffrey Buchbinder.

“S&P 500 companies have a shot at returning to pre-pandemic levels of corporate profits in 2021, which we didn’t think was possible just a couple of months ago. We have to re-evaluate how much earnings power corporate America will have post-pandemic.”

Pictured: Profile chart of the Micro E-mini S&P 500 Futures

Technical

Broad-market equity indices ended the week mixed, with the S&P 500 closing at a new all-time high.

During Last Week’s Action: Alongside the continued unwinding of election hedges and news that the vaccine developed by Pfizer and BioNTech was effective in preventing cases of the COVID-19 coronavirus, market participants showed increased confidence in their exploration of higher prices.

Going back, last week started off with a clear break and acceptance above the $3,500 high-volume area, which suggested initiative buyers were firmly in control. Index futures pared gains after Monday’s end-of-day spike liquidation, balancing for the remainder of the week.

Given Friday’s end-of-day rally, away from value, the week ended just above the balance area, providing a clear trading framework for the week that follows. Therefore, if participants were to continue their initiative activity and spend time outside of the balance area, then it's likely the market will continue higher. Otherwise, the potential exists for a failed break, which may precede re-entry into the prior balance area and further range-bound, responsive trade.

Fundamental

In a commentary, BlackRock discussed investing after the U.S. election and suggested more of the same market trends:

“Joe Biden’s victory in the presidential race likely ushers in a near-term market environment dominated by low rates, a hunt for yield and growth stocks. A Democratic takeover of the Senate looks unlikely, which would constrain the Biden administration’s ability to implement large-scale fiscal stimulus and public investment, tax, health care and climate related legislation.”

Additionally, BlackRock cautioned investors to pay attention to economic data from the euro area and U.S., as well as watch for the government’s response to the resurgence of COVID-19 cases, which may pressure the pending recovery.

Key Events

• Monday: Fed Clarida Speech, Fed Daly Speech.
• Tuesday: Retail Sales MoM, Industrial Production MoM and YoY, Business Inventories MoM, NAHB Housing Market Index, Fed Bostic Speech, Fed Daly Speech, Fed Williams Speech, Foreign Bond Investment, Overall Net Capital Flows.
• Wednesday: MBA Mortgage Applications, Building Permits MoM, Housing Starts MoM, Fed Evans Speech, EIA Cushing Crude Oil Stocks Change, EIA Distillate Stocks Change, Fed Williams Speech, Fed Bullard Speech, Fed Bostic Speech.
• Thursday: Continuing Jobless Claims, Initial Jobless Claims, Fed Mester Speech, Philadelphia Fed Manufacturing Index, CB Leading Index MoM, Existing Home Sales MoM, Fed Mester Speech.

Recent News

• Negative 2021 outlook as pandemic fallout weighs on economies.
• Pfizer Inc PFE COVID-19 vaccine data is credit positive.
• Resurgent COVID-19 threatens corporate credit’s improved trend.
• Eurozone consumer prices likely to slide for the month of October.
• Joe Biden’s clean energy platform is very heavy on clean transport.
• US banks’ tightening of underwriting standards slows, but remains.
• IEA says oil demand will not get a vaccine boost until later in 2021.
• Sour China-Australia ties hit talks over a liquefied natural gas deal.
• A COVID vaccine would boost the global economy, but not at once.
• Alphabet Inc GOOGL delivers internet with light beam.
• Monthly Funding Recap: Unicorns are born, funding holding steady.
• The IPO pipeline looks robust and these companies could go public.
• Dalio suggested markets are at a special moment with China's rise.
• Ford Motor Co F considers making its own EV battery tech.
• U.S. consumer sentiment ebbs; producer prices maintain their rise.
• Insurers face questions on ability to cover claims after a Fed report.

Key Metrics

• Sentiment: 55.8% Bullish, 19.3% Neutral, 24.9% Bearish as of 11/11/2020.
• Gamma Exposure: (Trending Neutral) 6,032,392,989 as of 11/13/2020.
• Dark Pool Index: (Trending Neutral) 43.1% as of 11/13/2020.

Photo by Miguel Montejano from Pexels.