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“A deception that elevates us is dearer than a host of low truths.” – Marina Tsvetaeva
Building upon yesterday’s momentum, US equity futures look to trade higher again this morning following strong sessions overnight in Asia and Europe. While there hasn’t been much in the way of a concrete catalyst, lower COVID case numbers and hospitalizations coupled with a trend of easing restrictions in the states that had some of the strictest mandates has investors optimistic that the long-delayed return to normal may be on the horizon. Today’s economic calendar is light, but there are still a ton of earnings to contend with, and we’re now just 24 hours from the biggest economic indicator of the week (and probably the month) with tomorrow’s CPI report for January.
Read today’s Morning Lineup for a recap of all the major market news and events from around the world, including the latest US and international COVID trends.
Yesterday’s rally and this morning’s strength in the futures markets have been welcomed by the bulls even if there wasn’t much in the way of a catalyst for the move. As markets look to stabilize after some recent volatility, below we provide a quick snapshot of where the major indices stand on a YTD basis and relative to their 50-day moving averages (DMA). The Nasdaq 100 (QQQ) has been the hardest hit YTD and heads into today’s trading session with a decline of nearly 10%. It is also the only major US index trading more than 5% below its 50-DMA. Along with the Russell 2000 (IWM), QQQ is the only other index ETF trading at ‘oversold’ levels (>1 standard deviation below its 50-DMA).
The technical definition of a market correction is a decline of 10% or more from a peak, and with the S&P 500 currently down just over 5% YTD, 2020 would currently qualify as a ‘half-correction’. SPY has barely moved out of oversold territory, but like the Nasdaq 100, it also remains below its 50-DMA. Finally, the Dow is often considered to be one of the least representative of the major indices, and it’s living up to that reputation this year. With a decline of just over 2% YTD, the Dow’s performance looks nothing like any of the other indices, and it’s the only one that is also anywhere close to trading above its 50-DMA. In fact, if current levels in the futures hold, it will be the only index ETF above its 50-DMA today.
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