S&P 500

Markets Rally On COVID-19 Optimism

Posted Monday, May 18, 2020 by
Shain Vernier • 1 min read

The bidding has been hot and heavy to open the week on Wall Street. Just over the halfway point of the trading day, the DJIA DOW (+885), S&P 500 SPX (+95), and NASDAQ (+240) are all in the green. For the time being, it appears that traders are betting that there is a light at the end of the COVID-19 tunnel.

Today’s U.S. economic calendar is a bit on the sparse side. However, there was one peripheral metric and a set of short-term Treasuries auctions:

Event                                                          Actual         Previous

NAHB Housing Market Index (May)           37                  30

3-Month T-Bill Auction                               0.130%          0.125%

6-Month T-Bill Auction                                0.150%          0.155%

All in all, this group of numbers doesn’t tell us a whole lot. Yields are mixed, stocks are up, and folks appear positive toward U.S. real estate in 2020. Once again, the markets are reacting to newfound optimism over the post-COVID-19 economic recovery.

Is COVID-19 Winding Down?

This morning’s action has been dominated by talks over a potential COVID-19 vaccine and FED hopes for a strong recovery. The DOW has responded, with a strong intraday rally in June E-mini DOW futures.

June E-Mini DOW Futures (YM), Daily Chart

Here are a few levels to watch in the June E-mini DOW for early this week:

  • Resistance(1): 62% Retracement COVID-19 Crash, 25,144
  • Support(1): Daily SMA, 23,754

Bottom Line: If stocks continue to catch bids, a shorting opportunity may develop for later in the week. Until elected, I’ll have sell orders queued up from 25,124. With an initial stop at 25,254, this trade produces 100 ticks on a sub-1:1 risk vs reward ratio.

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