On Thursday and Friday, the Nasdaq suffered its first successive days of declines since May 13. There was some major rotational action as traders paused in their pursuit of the "FATMAAN" names that have been leading the market for quite a while but they did continue to find good values elsewhere.
As we enter the new week there are a number of major news events that can serve as market-moving catalysts. First, this is a major week for earnings with reports due from Facebook (FB) , Apple (AAPL) , Amazon (AMZN) and Boeing (BA) . There have already been "sell the news" reactions to reports from Tesla (TSLA) and Microsoft (MSFT) , which came in ahead of estimates, so there is concern of further negative reactions, although the selling of the last two days may help.
The Federal Reserve is holding its policy meeting this week and will issue its statement on Wednesday at 2 p.m. ET. While no significant policy announcement is expected, the market will be looking for the groundwork to be set for more stimulus in the fall.
Also this week, the Republicans are set to announce further fiscal policy measures. There will be an intense political battle but there should be some deal reached fairly fast.
The question now is whether these news events will be enough to offset the headlines about the growth in the Covid-19 crisis. There are some signs of slowing in the number of cases but it isn't very meaningful at this time. The market has done a remarkable job of ignoring the drumbeat of negative news primarily because of the confidence that more fiscal and monetary support will be forthcoming.
One of the more interesting aspects of the market lately has been very aggressive trading in individual stocks. Even the Wall Street Journal had an article entitled "Everyone's a Day Trader Now," which discusses this phenomenon. While this trading is seen as an indication of a market top by many Wall Street veterans, there is no way to time how long it lasts. What's more, while it lasts it has a profound impact on sentiment and helps to cultivate good underlying support.
My plan is to continue to focus on trading of individual stocks and not become caught up in the market-timing debate. There are sectors such as precious metals that are doing very well while the big-cap technology names are increasingly volatile. Quite a few stocks have had some pullbacks and the issue now is whether they hold support.
It will be a very eventful week which I plan to navigate with intense vigilance and fast reactions.