EB Daily Market Report - Tuesday, November 10, 2020

Dear Members.

Today's DMR is abbreviated as Tom is unavailable for his usual comprehensive report.

The theme for today continues to be a rotation out of the Covid related stocks and more into industrials and those stocks that might benefit from a more robust opening of the economy. We certainly saw the impact of that yesterday with all four of our portfolios taking a hit as traders reduced risk and locked in profits on those stocks that have soared during 2020 and remain well above yearly lows. 

The NASDAQ has taken the brunt of the selling since hitting its all time high yesterday, losing over 5.5% at today's low. So far it tested and has held its 20 day moving average, currently at 11,456. Should that go then we could see a test of the 50 day, currently at 11,303. On the positive side, we saw a nice burst of buying when the NASDAQ hit that low of the day of 11,424; traders are not likely to totally abandon those stocks that have led the way higher for the past many months. But at the moment a number of stocks like Zoom, Peloton and Amazon, to name a few, aren't getting the type of love they've been getting since the March 23 lows.

I did notice that the CBOE Options Equity Put/Call Ratio ($CPCE) closed at .37 yesterday, matching the June 8 low. This shows us that the dominant option trade is on the long side. Since the Put/Call ratio can be seen as a contrarian indicator it might help explain some of the selling in tech stocks today. The VIX is fairly flat for the day after coming down sharply off its recent high of 41. It's still showing trader's are cautious and as long as it remains elevated many traders have one finger on the sell button.

Bottom line today is we're seeing the continuing rotation out of very popular tech stocks with the thinking that the vaccine news that came out yesterday favors the "get out of the house" stocks. We'll see how long that lasts and if those stocks that heretofore have been seen as "value stocks" can hold on to their gains or will traders gravitate back to those stocks that have soared - many on terrific earnings - and might soon look like nice bargains.

At your service,

John Hopkins