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  1. Home
  2. / Video

One Tweet Pulls the Rug Out From Under the Indexes

Despite the president's promise of no stimulus until after Nov. 3, there are no signs yet that this is the sort of correlated selling that leads to a deep correction.
By JAMES "REV SHARK" DEPORRE
Oct 06, 2020 | 04:44 PM EDT
Stocks quotes in this article: IWM

Stocks, especially small caps, have been trading in a very upbeat manner for nearly two weeks. The Russell 2000 exchange-traded fund  (IWM)  even managed to hit its highest level since Feb. 25. Breadth was quite good and the market looked solid even though the FATMAAN tech names were struggling.

One of the main driving forces for this positive action has been hopes that Congress would agree on a fiscal stimulus deal. The bears have been unable to gain any traction out of fear that a deal could be made at any time.

Around 2:45 p.m. ET, President Donald Trump posted a tweet that he was ending all negotiations on a stimulus bill until after the election. Stocks immediately dropped with the S&P 500 losing 1.2%. Breadth went from five to two positive to three to 4.5 negative. There were quite a few U-turns, but given how much some stocks have rallied recently, it was still fairly mild selling.

The big question now is whether there will be another wave of selling since we have lost the support of a potential fiscal stimulus deal. Given how Trump has conducted negotiations in the past, it would not be a big surprise if there is another try, but it is difficult to figure out the political calculus being used with the election just a month away.

The good news is that there still are no signs that this is the sort of correlated selling that leads to deep, ugly corrections. Stock pickers are still out there and are looking for entries. Earnings season is fast approaching and that will be the main focus.

There will be some economic fallout if no fiscal stimulus deal is made and we will hear much more about it but there is nothing technically negative at this point.

Have a good evening. I'll see you tomorrow.

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At the time of publication, DePorre had no position in the securities mentioned.

TAGS: Investing | Politics | Stocks | Video

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