Futures were indicated substantially lower overnight but have bounced sharply. Currently, the DJIA is indicated to open in positive territory as we await weekly unemployment claims data at 8.30 am ET.
There has been some concern recently about a growing number of coronavirus cases in various US states and China but there has been limited reaction to that news. Overnight a China disease specialist stated that Beijing had the latest outbreak under control and that helped futures to bounce back.
Even in states that are seeing a record high in coronavirus cases, there does not seem to be any move toward closing down the economy again. There is limited public support for more lockdowns which may prolong the problem but there is such fatigue with the problem that many people are willing to take their chances.
Predicting what the market is going to do next is big business and many sophisticated market strategists are frustrated that their carefully crafted theories about what the market will do next are being ignored. The economic data, valuations metrics, pandemic models, and all the rest are meaningless as the market is awash in liquidity that is looking for a place to go.
Old-time market professions are often full of disdain for young and naïve market players that ignore all the very valid worries and concerns that can impact the market. Those folks that see the stock market as just a big video game are used as contrary indicators that are signaling that disaster awaits.
The old-timers are right -- the battle will end at some point like all market rallies do -- but that is the issue we should worry about. The issue we should worry about is timing. How much longer can this market run before that long list of negatives and all those stupid day-traders start to matter?
The answer is that no one knows. It will depend on when liquidity contracts and the only way to know when liquidity is contracting is to watch the price action.
It really isn't rocket science. Stocks go up when there is a large amount of cash chasing them. That isn't going to stop for a sustained period even if there is negative news. Dip buyers will keep buying and traders will keep trading as long as they have cash and can find ideas. Those ideas don't need to be cheap stocks. All that is needed to attract interest is movement that can be traded.
Weekly unemployment claims are coming up and we will see if there is any notable reaction. The only report that has really mattered lately are the ones that have been much better than expected. Liquidity trumps bad news and helps to accelerate good news. It isn't very sophisticated or complicated but it is what is working.