Next week we will have earnings report from the mega techs and of course the Presidential election is just around the corner. The reaction to the earnings report could be muted since the election outcome is so close by. The mega techs will continue to grow, but the intense scrutiny from Congress could create short term pressure.
The wall of worry is real. The non-stop news coverage about the election, virus aid package negotiation and the resurgence of the virus in the coming flu season can attest to the validity of the worries. Yet, the market has had its own mind ever since the March 2020 low. It just kept going higher without all the worries.
On last Thursday (10/08/20200) we sent out a private note stating that the small cap Russell 2000 index is breaking out in the midst of fiscal stimulus package negotiation. This is the first time ever that the Russell 2000 index is outperforming the Dow and S&P 500 since the Russell 2000 index topped in August 2018.
Since the NASDAQ found the bottom around 10500 level, it bounced anemically last week. All three indices managed to produce a weekly gain last week. But the cycle indicators are not presenting a picture of a finished bottom, meaning the bounce from the support level is a mechanism of trading, rather than investors initiating new positions.
