Stocks see mixed price action and increased rotation

Abraham George Macro View

Hopes and visibility of a vaccine has opened the gates for the world of finance and economics. Think we have arrived at the beginning of the end of COVID. It is still another 7 to 10 months away for everything to be under control but as the CEO of Pfizer Dr. Bourla said, “we are seeing the light at the end of the tunnel”. What I cannot come to grips with is, if this is next best thing that has happened to mankind since slice bread, why did he sell 62% of his Pfizer shareholding the very same day the announcement of the vaccine was made? Only he knows better!

In Europe, Spanish stocks are up 24% since the end of Oct but it would take another 30% rise to reach pre- COVID levels of Feb. similar situation in Italy too. Stocks have risen 19% since end of Oct but would take another 23% to regain pre-COVID levels. As an international investor if you are convinced with further dollar weakness and a rise in European stocks these markets should provide good opportunities.

Apple has ended their almost 15 year partnership with Intel Corp, and has started making their own chips. The company claims the new Mac Book Air will be 3.5 times faster than the previous generation. While Alibaba set single day sales records in China, its stock plunged on the back of new proposed antitrust regulations that threaten the platform’s business model.

Equities

The Dow and S&P 500 are showing mixed characteristics. On Nov 10 the Dow rallied while the S&P fell. Yesterday the S&P rallied while the Dow fell. Yesterday’s advance/ decline was flat at 1:1. Today’s and tomorrow’s momentum will be critical in maintaining further rise in the major indexes. Any fall below 26,144 (Dow) and 3234 (S&P) will confirm the upside potential is withering.

Bonds

Yields are moving higher and bonds are falling . Next down side targets are at 167^05 the Mar 18 low. Upside should be capped at 175^27 the Nov 05 high.

Euro

The Euro’s down move is corrective and should soon start moving higher again.

Gold

Gold is very volatile within a range. The critical levels to watch on the top side is 1966. On balance there is more downside potential. Immediate supports are at 1835.

Abraham George is a seasoned investment manager with more than 40 years of experience in trading & investment and portfolio management spanning diverse environments like banks (HSBC, ADCB), sovereign wealth fund (ADIA), a royal family office and a hedge fund.