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“It’s not what happens to you, but how you react to it that matters.” – Epictetus
We got some big economic numbers this morning as Q3 GDP rose at an annualized rate of 33.1% versus forecasts for growth of 32.0. This is obviously a record number, but when a 33.1% gain follows a 31.4% drop, you’re still almost 10% in the hole. Jobless claims also dropped this week as both initial and continuing claims dropped to post-pandemic lows. So far, the initial market reaction has been positive. Futures were higher overnight, reversed all of those gains and more heading into the report, but have now moved back into positive territory after the releases.
Be sure to check out today’s Morning Lineup for a rundown of the latest stock-specific news of note, market performance in the US and Europe, key earnings data from the US and Europe, economic data, trends related to the COVID-19 outbreak, and much more.
Even for a big down day like yesterday, there was a pretty decent amount of technical damage within the market as the percentage of stocks trading above their 50-day moving average (DMA) dropped from 46.1% down to 27.4%. Heading into this week, more than two-thirds of stocks in the S&P 500 were above their 50-DMA, today it’s less than a third, and based on where the futures are now, it may be less than a quarter by the closing bell.
The last time there was a lower percentage of stocks above their 50-DMA was just back at the September lows when it bottomed out at 25.5%, and before that, you have to go back to the Spring to find lower readings. All in all, readings like the current one represent oversold conditions but aren’t especially rare.