Pfizer Raises 2021 COVID-19 Vaccine Sales Forecast to $33.5 Billion

The company said the raised sales forecast of the vaccine is based on signed deals for 2.1 billion doses this year, and that it could increase if it signs additional contracts. Pfizer and BioNTech expect to produce 3 billion doses of the vaccine this year.

Pfizer gained a head start in December with the first U.S. emergency authorization of a COVID-19 vaccine, and has since jumped ahead of rivals that have faced manufacturing hurdles. Johnson & Johnson’s vaccine has also been under scrutiny over safety concerns.

J&J last week estimated full-year COVID-19 vaccine sales of $2.5 billion, while Moderna has forecast $19.2 billion.

Pfizer has said it believes a third “booster” dose of its vaccine will be needed in the future, which could help it bring in more sales in 2022. The company said on Wednesday it could file for an emergency use authorization for a potential booster dose as early as August.

Top infectious disease official Anthony Fauci said on Sunday that Americans who are immune compromised may end up needing booster shots as the United States deals with increasing cases from the Delta variant of the coronavirus.

The United States purchased 200 million more doses of the Pfizer/BioNTech vaccine last week to help with pediatric vaccination as well as possible booster shots – if they are needed.

Pfizer’s previous forecast in May of $26 billion was based on deals signed for 1.6 billion doses. Wall Street was broadly in line with that forecast at $28.51 billion, according to nine analysts polled by Refinitiv.

Expenses and profit from the vaccine are split 50-50 between Pfizer and BioNTech.

(Reporting by Manas Mishra in Bengaluru; Editing by Sriraj Kalluvila)

Johnson & Johnson Completes Breakout Pattern

Dow component Johnson & Johnson (JNJ) is trading higher by 1% in Wednesday’s pre-market session after beating Q2 2021 top and bottom line estimates and raising fiscal year 2021 guidance. The pharmaceutical and home health care giant earned $2.48 per-share during the quarter, $0.19 better than expectations, while revenue rose an impressive 27.1% year-over-year to $23.31 billion, nearly $800 million higher than consensus.

Fighting Off Bad Press

The company dealt with a wave of misinformation about the Janssen vaccine and potential for side effects in the first half of the year. The negative news flow has damped sales, with just 13 million doses administered to date, compared to around 330 million for Pfizer Inc. (PFE) and Moderna Corp. (MRNA).  Even so, quarterly product sales grew 10% and these controversies aren’t the tipping point for the $447 billion mega cap with 2.63 billion shares outstanding.

Johnson & Johnson faces a bigger challenge with ongoing talcum powder and opiate litigation.  It’s just finalized a $26 billion opioid settlement with more than 40 states and may attempt to “rope off” potential talc exposure into a separate entity that can be taken through bankruptcy proceedings. However, that could be a hard sell for U.S. courts flipping through the balance sheet of the 12th largest publicly traded corporation.

Wall Street and Technical Outlook

Wall Street consensus hasn’t budged in 2021 despite front page headlines, with an ‘Overweight’ rating based upon 12 ‘Buy’, 3 ‘Overweight’, 4 ‘Hold’, and 1 ‘Underweight’ recommendation. Price targets currently range from a low of $160 to a Street-high $203 while the stock is set to open Wednesday’s session about $18 below the median $188 target. Strong price action so far in 2021 suggests that gains will stretch into the median target by year’s end.

Johnson & Johnson broke out above February 2020 resistance near 150 in January 2021, entering a strong uptrend that posted an all-time high at 173.65 a few weeks later. Price action since that time has carved the outline of a bullish ascending triangle pattern that forecasts a measured move target in the 190s following a breakout. However, that event could take time to unfold because selling pressure in the last seven weeks has weakened an otherwise solid technical outlook.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

Exclusive: J&J Exploring Putting Talc Liabilities Into Bankruptcy, Sources Say

During settlement discussions, one of the healthcare conglomerate’s attorneys has told plaintiffs’ lawyers that J&J could pursue the bankruptcy plan, which could result in lower payouts for cases that do not settle beforehand, some of the people said. Plaintiffs’ lawyers would initially be unable to stop J&J from taking such a step, though could pursue legal avenues to challenge it later.

J&J has not yet decided whether to pursue the bankruptcy plan and could ultimately abandon the idea, some of the people said. Reuters could not determine whether J&J has retained restructuring lawyers to help the company explore the bankruptcy plan.

J&J faces legal actions from tens of thousands of plaintiffs alleging its Baby Powder and other talc products contained asbestos and caused cancer. The plaintiffs include women suffering from ovarian cancer and others battling mesothelioma.

Johnson & Johnson Consumer Inc. has not decided on any particular course of action in this litigation other than to continue to defend the safety of talc and litigate these cases in the tort system, as the pending trials demonstrate,” the J&J subsidiary housing the company’s talc products said in a statement provided to Reuters. J&J declined further comment.

Should J&J proceed, plaintiffs who have not settled could find themselves in protracted bankruptcy proceedings with a likely much smaller company. Future payouts to plaintiffs would be dependent on how J&J decides to fund the entity housing its talc liabilities.

J&J is now considering using Texas’s “divisive merger” law, which allows a company to split into at least two entities. For J&J, that could create a new entity housing talc liabilities that would then file for bankruptcy to halt litigation, some of the people said.

The maneuver is known among legal experts as a Texas two-step bankruptcy, a strategy other companies facing asbestos litigation have used in recent years.

J&J could also explore using another mechanism to effectuate the bankruptcy filing besides the Texas law, some of the people said.

A 2018 Reuters investigation https://www.reuters.com/investigates/special-report/johnsonandjohnson-cancer found J&J knew for decades that asbestos, a known carcinogen, lurked in its Baby Powder and other cosmetic talc products. The company stopped selling Baby Powder in the U.S. and Canada in May 2020, in part due to what it called “misinformation” and “unfounded allegations” about the talc-based product. J&J maintains its consumer talc products are safe and confirmed through thousands of tests to be asbestos-free.

The blue-chip company, which boasts a roughly $443 billion market value, faces legal actions from more than 30,000 plaintiffs alleging its talc products were unsafe. In June, the U.S. Supreme Court declined to hear J&J’s appeal of a Missouri court ruling that resulted in $2 billion of damages awarded to women alleging the company’s talc caused their ovarian cancer.

Plaintiffs’ lawyers view the two-step bankruptcy strategy as one that skirts potentially expensive settlements or judgments. Companies view it as a way to corral numerous lawsuits in one court for efficient negotiations that bankruptcy law dictates for asbestos liabilities. The company outside bankruptcy can reach a funding agreement with the entity navigating a court restructuring to cover future settlement payments.

In 2017, Brawny paper towels manufacturer Georgia-Pacific used the Texas law to move asbestos liabilities to an entity that later filed for bankruptcy in North Carolina.

Bankruptcy cases filed to resolve litigation, including those related to asbestos, often take years, and almost never fully repay creditors. OxyContin maker Purdue Pharma LP, for instance, is near resolving thousands of opioid lawsuits after two years of bankruptcy negotiations with a plan valued at more than $10 billion to address trillions of dollars in claims.

Another company, DBMP LLC, filed for bankruptcy last year to resolve asbestos liabilities and said the case could take up to eight years, according to a company press release.

J&J also faces litigation alleging it contributed to the U.S. opioid epidemic and recently recalled certain spray sunscreen products after discovering some of them contained low levels of benzene, another carcinogen.

The company in June agreed to pay $263 million to resolve opioid claims in New York. It has denied wrongdoing related to its opioids.

For a look at all of today’s economic events, check out our economic calendar.

(Additional reporting by Nate Raymond; editing by Vanessa O’Connell and Edward Tobin)

 

Moderna’s Shares Up By 8% After Addition to S&P 500

The shares of Moderna are rallying today after news emerged that the company would be included in the S&P 500, replacing Alexion Pharmaceuticals, which is being acquired by AstraZeneca (AZN).

Moderna To Enter The S&P 500

Biotech company Moderna is already popular throughout the globe after playing a key role in developing the Coronavirus vaccine. The company is set to get even more popular after it was announced that it would be included in the S&P 500 index.

Moderna is set to replace drugmaker Alexion Pharmaceuticals, which is expected to be acquired by Big Pharma giant AstraZeneca soon. S&P 500 said the changes would come into effect before the market opens by next Wednesday

The biotech company manufactures one of the three Covid-19 vaccines approved by the United States Food and Drug Administration (FDA). It is joined by Pfizer (PFE) and BioNTech (BNTX), who manufacturer a two-dose vaccine similar to Moderna’s. Meanwhile, Johnson & Johnson (JNJ) offers a single-dose Covid shot.

Moderna’s Shares Are Rallying

The shares of Moderna have been rallying since the news broke that it would be joining the S&P 500. At the time of this writing, Moderna (MRNA) is up by 8% at Friday’s trading session and could soar higher over the coming hours.

MRNA stock chart. Source: FXEMPIRE

Year-to-date, Moderna’s stock price has gone up by nearly 175%, with the company now having a valuation of over $100 billion. Its addition to the S&P 500 means will see a wide range of passively managed funds and exchange-traded funds (ETFs) that reflect the performance of the S&P 500 add the Moderna stock to its portfolio. This would increase the company’s exposure and allow more institutional investors to access it. This is the key reason why the stock has been performing excellently today.

With more vaccines needed globally to fight the pandemic, Moderna’s stock price could experience further gains over the coming months.

Nasdaq Ends Lower as Investors Sell Big Tech

Amazon, Apple Tesla and Facebook all fell. Nvidia tumbled around 4%.

The S&P 500 technology sector index ended a four-day winning streak. Earlier this week, investors’ favor for heavyweight growth stocks pushed the S&P 500 and the Nasdaq to record highs.

The S&P 500 energy sector index fell more than 1% and tracked a drop in crude prices on expectations of more supply after a compromise agreement between leading OPEC producers.

Fresh data showed the number of Americans filing new claims for unemployment benefits fell last week to a 16-month low, while worker shortages and bottlenecks in the supply chain have frustrated efforts by businesses to ramp up production to meet strong demand for goods and services.

Federal Reserve Chair Jerome Powell told lawmakers he anticipated the shortages and high inflation would abate. Yet many investors still worry that more sustained inflation could lead to a sooner-than-expected tightening of monetary policy.

“People are very nervous and concerned about inflation, tax rates and the (2022 midterm) election. Those three things are very much on people’s minds,” said 6 Meridian Chief Investment Officer Andrew Mies, describing recent phone calls with his firm’s clients.

Unofficially, the Dow Jones Industrial Average rose 54.52 points, or 0.16%, to 34,987.75, the S&P 500 lost 14.29 points, or 0.33%, to 4,360.01 and the Nasdaq Composite dropped 101.82 points, or 0.7%, to 14,543.13.

Morgan Stanley dipped as much as 1.2% after it beat expectations for quarterly profit, getting a boost from record investment banking activity even as the trading bonanza that supported results in recent quarters slowed down.

Second-quarter reporting season kicked off this week, with the four largest U.S. lenders – Wells Fargo & Co, Bank of America Corp, Citigroup Inc and JPMorgan Chase & Co – posting a combined $33 billion in profits, but also highlighting the industry’s sensitivity to low interest rates.

Blackstone said late on Wednesday it would pay $2.2 billion for 9.9% stake in American International Group’s life and retirement business. AIG and Blackstone both rallied.

Johnson & Johnson dipped after it voluntarily recalled five aerosol sunscreen products in the United States after detecting a cancer-causing chemical in some samples.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Noel Randewich; Additional reporting by Devik Jain and Shreyashi Sanyal in Bengaluru; Editing by Maju Samuel)

 

SP500 at Key Daily Support – Break It or Make It

Fundamental analysis

The U.S. is actually moving pretty close to having most Covid restrictions lifted across the country on businesses like restaurants, amusement parks, theaters, museums, music venues, etc.

There are social gathering capacity limits in some states and cities still, but those are mostly scheduled to phase out by this summer, assuming no major setbacks in getting and keeping the virus under control.

Data yesterday showed the ISM Manufacturing Index unexpectedly slid in April though the gauge remained in expansion territory for the 11th month in a row. The read of 60.7% is considered very healthy but the slowdown reveals underlying struggles to meet demand.

The supply-demand imbalance pushed the backlog of orders component to a record-high while customer inventories plunged to an all-time low. The Prices component jumped to its highest level since 2008 with all 18 industries reporting they paid higher prices for raw materials for the fourth straight month. This reflects two main competing narratives on Wall Street right now.

Bullish vs bearish expectations

Bulls believe pent-up consumer demand, underpinned by generous fiscal and monetary supports, will usher in an economic boom not experienced in a generation, which will pull corporate profits up along with it.

Bears, on the other hand, believe higher prices will continue building and eventually put a dent in the rosy expectations for growth. Federal Reserve officials continue to make the case that the current inflation trends are transitory and will ease as supply chain kinks get ironed out.

Many Wall street bears argue that higher prices will be more sticky than anticipated, particularly those that are already being passed on to consumers. Today brings both the Trade Balance Report and Factory Orders for March.

First quarter earnings also continue to flow with Pfizer among today’s highlights. Pfizer’s vaccine, developed with BioNTech, is one of the three authorized for use in the U.S. Along with Moderna,

Pfizer stands apart from rival vaccine makers Johnson & Johnson and AstraZeneca because they are selling their Covid-19 vaccines for profit. Pfizer reports before markets open. Today I am closely watching Zillow, Activision Blizzard, Corteva, CVS, Ferrari, Marathon, and Virgin Galactic.

Technical analysis

I have mentioned swing setup in my weekly outlook. So, today I want to focus on intraday levels. SP500 is approaching key Gann level at 4160. If price sustains below, expect to see a sell-off. On the other hand, 4225 is a bullish breakout level. It seems not easy to get there.

Neutral zone 4225 – 41160. Middle-strength level within this area – 4129.5, weak levels – 4209 and 4176.5. In case of bearish breakout, look for 4128, 4096 (middle-strength levels) and 4144, 4112, 4180 (weak levels).

For a look at all of today’s economic events, check out our economic calendar.

J&J reports $100 million in vaccine sales as results top forecasts

The company, which has previously said the vaccine will be available on a not-for-profit basis until the end of the pandemic, also tightened its forecast for adjusted profit this year, showing it largely performed as previously expected.

Use of the vaccine was paused last week by U.S. regulators as they review reports of rare but serious blood clots in recipients.

The company now expects full-year adjusted profit of $9.42 to $9.57 per share, compared with its prior forecast of $9.40 to $9.60 per share, after sales in its pharmaceuticals business helped boost overall profit.

Excluding items, the company earned $2.59 per share, beating analysts’ estimates of $2.34 per share, according to IBES data from Refinitiv.

Sales of cancer drug Darzalex rose 45.7% to $1.37 billion and sales of Stelara, a treatment for Crohn’s disease and plaque psoriasis, rose about 18% to $2.15 billion.

Net earnings rose nearly 7% to $6.20 billion, or $2.32 per share.

Sales rose 7.9% to $22.32 billion, beating estimates of $21.98 billion.

The company also declared an increase in its quarterly dividend to $1.06 per share from $1.01 per share.

(Reporting by Manas Mishra and Manojna Maddipatla in Bengaluru; Editing by Anil D’Silva)

Gold Prices Surge As U.S Inflation Heats Up – What’s Next?

Gold prices surged on Tuesday from their lowest level in more than a week after a sharp rise in U.S inflation boosting the metal’s appeal as an inflation hedge.

The Consumer Price Index, which measures the change in what customers pay for goods and services such as groceries, clothing and gas, climbed 0.6% in March – it’s biggest monthly increase since August 2012. This report follows last week’s PPI data, which showed producer prices rose 4.2% annually, the fastest pace since September 2011.

The U.S government and Federal Reserve’s massive quantitative easing programs have started to draw criticism and raise concerns about the long-term risks of overspending and overstimulating the economy at such an aggressive pace.

Inflation will remain the hot topic this week with Federal Reserve Chair Jerome Powell speaking at the Economic Club of Washington on Wednesday.

So far, Jerome Powell has artfully dodged questions relating to the rapid rise in inflation, stating that any price acceleration will be temporary. But policy makers will have to address this problematic issue eventually before it snowballs into something they can no longer control.

Another macro event that has lend support to gold prices this week was news that U.S health officials’ have halted the use of Johnson & Johnson’s COVID-19 vaccine, due to blood clotting occurrences in a few recipients.

Where are prices heading next? Watch The Commodity Report now, for my latest price forecasts and predictions:

For a look at all of today’s economic events, check out our economic calendar.

Stocks Mixed After Inflation Exceeds Analyst Expectations

Inflation Rate Increased By 2.6% In March

The U.S. has just released Inflation Rate and Core Inflation Rate reports. The reports indicated that Inflation Rate increased by 2.6% year-over-year in March compared to analyst consensus which called for growth of 2.5%. Core Inflation Rate increased by 1.6% year-over-year compared to analyst consensus of 1.5%.

Inflation is moving higher on a year-over-year basis as prices were weak during the acute phase of the coronavirus crisis a year ago. Inflation looks more calm on a month-over-month basis although it also exceeded analyst expectations. Inflation Rate grew by 0.6% month-over-month in March compared to analyst consensus of 0.5%, while Core Inflation Rate increased by 0.3%.

S&P 500 futures are swinging between gains and losses in premarket trading after the release of inflation reports. Meanwhile, Treasury yields failed to gain additional upside momentum after reports indicated that inflation exceeded analyst expectations.

U.S. Recommends Pausing The Use Of Johnson & Johnson’s COVID-19 Vaccine

Shares of Johnson & Johnson found themselves under pressure in premarket trading after U.S. health agencies called for a temporary pause of the use of the company’s coronavirus vaccine.

The problems of Johnson & Johnson are similar to AstraZeneca‘s problems. In rare cases, recipients of the vaccine developed blood clots.

While these cases are extremely rare, the negative headlines may decrease people’s confidence in vaccination in general, so Johnson & Johnson’s problems may serve as a bearish catalyst for the market.

Euro Area Economic Sentiment Declines

Today, EU reported that Euro Area ZEW Economic Sentiment Index decreased from 74 in March to 66.3 in April. Analysts expected that it would grow to 77. In Germany, Economic Sentiment Index declined from 76.6 to 70.7 compared to analyst consensus of 79.

The reports indicated that European businesses have started to feel the pressure from the third wave of the virus. At the same time, it should be noted that ZEW Economic Sentiment Index remains at high levels.

For a look at all of today’s economic events, check out our economic calendar.

What is next for US stock market and dollar?

SP500 index is now up more than +9% year-to-date, while the Dow is up +9.5% and the Nasdaq is up more than +7%. Bulls remain committed to their outlook for an economic boom, all of which is underpinned by the U.S. Federal Reserve’s continued easy monetary policies.

Fundamental analysis

Federal Reserve and monetary policy

Federal Reserve Chairman Jerome Powell reiterated last week that the Fed would continue to remain extremely accommodative until the economy has further recovered. Speaking during an IMF event, Powell pointed out that while parts of the economy are recovering strongly, “there’s a very large group of people who are not.”

The Fed Chair acknowledged the better than expected job gains in March and said the Fed would consider a string of similar monthly gains to progress. Also, Powell again pointed to the weak labor market participation rate as a disinflationary force that will keep temporary price spikes under control. What Powell seems more concerned about is the ongoing pandemic and rising infections across many parts of the world, noting that the “world economy” can’t return to normal until the virus is under control everywhere.

Vaccination

Keep in mind, many of our largest U.S. businesses get +40% or more of their revenue from the global economies. Obviously, it is going to take more widespread vaccination and better efforts in other countries to orchestrate a global recovery. The U.S. remains one of the leaders in vaccinations but there might be a little hiccup the next week or two, as Johnson & Johnson has run into some manufacturing snafus. The CDC said -85% fewer doses of the company’s vaccine will be shipped to states next week, though they did not provide a reason.

Around 15 million J&J doses had to be destroyed because of an ingredient mix up at a factory late last month. Traders are also keeping an eye on developments surrounding AstraZeneca’s Covid-19 vaccine which has been suspended in several country’s due to a possible link to blood clots. Unfortunately, the AstraZeneca drug is the dominant vaccine in use across the globe because of its lower cost and easier distribution. Most advanced economy countries that are using AstraZeneca’s drug also have vaccine supplies from other drug makers but the suspension will still mean a slowdown for vaccine rollouts in many parts of Europe and Asia.

AstraZeneca’s safety issues could mean no vaccine supplies at all for some developing countries where it’s the only option. An underlying concern is that these compounding safety issues, shot suspensions, and other hiccups could lead to an overall “crisis of confidence” in vaccine campaigns, meaning fewer people getting inoculated and delaying the global end to the pandemic.

News and data to watch

Next week brings the Consumer Price Index on Tuesday; Import/Export Prices and the Fed’s Beige Book on Wednesday; Empire State Manufacturing, Retail Sales, Industrial Production, Business Inventories, and the NAHB Housing Market Index on Thursday; and Housing Starts on Friday.

The main focus next week will likely be on Q1 earnings, with the season “unofficially” kicking off with results from big Wall Street banks Goldman Sachs, JPMorgan Chase, and Wells Fargo on Wednesday, followed by Bank of America, Citigroup, and U.S. Bancorp on Thursday.

SP500 technical analysis

sp500 technical analysis

So far SP500 futures still didn’t break above Gann’s resistance. Yet the weekly closing looks very strong. But we can consider longs at this stage only if this resistance turns into support. In that case, 4250 is the natural magnet. However, I am a bit skeptical it may happen.

I like to trade SP500 when Advance Decline Line and cycles give the same signal. At the moment, it is better to pay attention to commodities. There are few markets ready for big moves. At the same time, SP500 cycles turned to the downside, while ADL is very bullish. If we will see a divergence in ADL in coming week or two, I will look for a sell signal. But at the moment, nothing is clear yet.

Dollar Index (DXY) technical analysis

dollar forecast

Overall, the Federal Reserve policy remains bearish for American currency in the long run. But we don’t have a strong fundamental setup to establish swing trades. So, I want you to pay attention to the smaller time frame. The dollar index (DXY) respects 4h MA50 and MA200 quite well. So, we can take advantage of that.

If the price breaks and sustains under 91.90, the price will reach 91.5 and 91 in extension. On the other hand, breaching the 4h MA50, the dollar will target the 93 – 93.5 zone.

For a look at all of today’s economic events, check out our economic calendar.

Why Shares Of Johnson & Johnson Are Under Pressure Today?

Johnson & Johnson Video 09.04.21.

Johnson & Johnson Stock Moves Lower After European Medicines Agency Starts To Review Reports Of Rare Blood Clots

Shares of Johnson & Johnson found themselves under pressure after the European Medicines Agency started to review possible cases of blood clots that may have been caused by the company’s coronavirus vaccine. The European Medicines Agency noted that it found four cases of such blood clots.

Johnson & Johnson stated that “no clear causal relationship has been established between these rare events and the Janssen COVID-19 vaccine”.

Earlier, AstraZeneca COVID-19 vaccine was found to cause blood clots in rare cases. The UK recommended not to use the vaccine for people under 30, while Australia decided that vaccine should not be given to people under 50.

While regulators have stated that benefits outweighed risks in the case of AstraZeneca vaccine, the scope of probes into vaccine safety has grown while various countries have introduced restrictions on its use.

What’s Next For Johnson & Johnson?

While there are just four reports of potential blood clots in people who received Johnson & Johnson coronavirus vaccine and no link between the vaccine and clots has been established, the news served as a bearish catalyst for the stock.

AstraZeneca’s problems got a lot of bad press, so the news about potential issues with the Johnson & Johnson vaccine could also generate many negative headlines.

At the same time, Johnson & Johnson is a huge company which does not depend on the success of its coronavirus vaccine. Analysts expect that the company will report earnings of $9.51 in 2021 and $10.31 in 2022, so the stock is trading at roughly 15 forward P/E which is rather cheap in today’s market environment.

In this light, the negative headlines may continue to put some pressure on shares of Johnson & Johnson in the upcoming trading sessions, but the stock may also attract value-oriented investors who are trying to find reasonably valued companies.

For a look at all of today’s economic events, check out our economic calendar.

EU Drugs Regulator Clears J&J’s Single-Shot COVID-19 Vaccine

By Muvija M and Pushkala Aripaka

The COVID-19 shot is the fourth to be endorsed for use in the EU after vaccines from Pfizer-BioNTech, AstraZeneca-Oxford University and Moderna, and is recommended for those over 18 years of age, the European Medicines agency (EMA) said. It’s the first single-dose shot.

The United States, Canada and Bahrain have also approved the shot. South Africa is carrying out an expedited review.

“With this latest positive opinion, authorities across the European Union will have another option to combat the pandemic and protect the lives and health of their citizens,” EMA’s Executive Director Emer Cooke said.

Final approval by the European Commission is expected soon. EU conditional marketing authorisation allows a treatment to be sold for a year without full data on its efficacy and side-effects being available.

The region is having difficulty taming a spike cases driven by a more contagious variant of the coronavirus, with countries including Italy and France imposing fresh lockdowns.

J&J chief scientific officer Paul Stoffels described it as a “landmark moment” for the U.S. drugmaker and the world as governments struggle to control the pandemic which has crushed economies and killed more than 2.7 million.

The shot, called COVID Vaccine Janssen after the J&J unit that developed it, will help bulk up EU vaccine supplies after a faltering rollout due to delivery delays from Pfizer and AstraZeneca.

J&J has agreed to deliver at least 200 million doses to the EU this year, including 55 million in the second quarter, with the first shipments expected next month.

Exact volumes are not clear though and the U.S. drugmaker has told the European Union it is facing supply issues that may complicate plans to deliver the second quarter doses in full.

The news came as Norway and Denmark temporarily suspended the use of AstraZeneca’s vaccine after reports of the formation of blood clots in some who have been vaccinated.

TRIAL DATA

In J&J’s 44,000-person global trial, the vaccine was found to be 66% effective at preventing moderate-to-severe COVID-19 four weeks after inoculation. It was 100% effective in preventing hospitalization and death due to the virus.

In its statement on Thursday, the EMA said the vaccine was found to be 67% effective two weeks after inoculation.

The side effects were usually mild or moderate and cleared within a couple of days after vaccination, it said. The most common ones were pain at the injection site, headache, tiredness, muscle pain and nausea.

Though many rival shots have reported a higher protection rate, J&J’s vaccine could help boost thin EU supplies and simplify inoculation campaigns because it does not require a second dose or need to be shipped frozen.

Direct comparison between headline numbers reported by different drugmakers is difficult because their trials had different goals, and J&J’s study was conducted while new, more contagious variants of the virus were circulating.

Its vaccine delivers immunity-building proteins through a weakened version of a common cold virus, similar to AstraZeneca’s shot. J&J has also used the technology in its EU-approved Ebola vaccine.

(Reporting by Muvija M and Pushkala Aripaka in Bengaluru; additional reporting by Francesco Guarascio in Brussels and Bart Meijer in Amsterdam; Editing by Josephine Mason, Mark Potter and Kevin Liffey)

 

Gold Continues Declines on Bond Yield Jitters

Not good. Gold bulls can be truly upset. The yellow metal continued its bearish trend last week. As the chart below shows, the price of gold has declined from $1,807 on Monday (Feb. 22) to $1,743 on Friday (Feb. 26).

What happened? Well, last week was full of positive economic news. In particular, personal income surged by 10 percent in January, compared to only 0.6-percent rise in the previous month. Meanwhile, consumer spending increased 2.4 percent, following a 0.4-percent decline in December. This means that, on an absolute basis, personal consumption expenditures have almost returned to the pre- pandemic level, as the chart below shows.

Additionally, durable goods orders jumped by 3.4 percent in January versus a 1.2-percent increase one month earlier. Moreover, initial jobless claims declined from 841,000 to 730,000 in the week ending February 20, as the chart below shows. It means that the economic situation is improving, partially thanks to the December fiscal stimulus.

And, on Saturday (Feb. 27), the House of Representatives passed Biden’s $1.9 trillion stimulus package. Although the bill has yet to be approved by the Senate, the move by the House brings us one step closer to its implementation. Although the additional fiscal stimulus may overheat the economy and turn out to be positive for gold prices in the long-term, the strengthened prospects of higher government expenditures can revive the optimism in the financial markets, negatively affecting the safe-haven assets such as gold .

Finally, on Saturday, the FDA authorized Johnson & Johnson’s vaccine against COVID-19. This decision expands the availability of vaccines, which brings us closer to the end of the epidemic in the U.S. and offers hope for a faster economic recovery. The new vaccine is highly effective (it provides 85-percent protection against severe COVID-19 28 days after vaccination) and most importantly, requires only one dose, which facilitates efficient distribution. So, the approval of another vaccine is rather bad news for gold and could add to the metal’s problems in the near future.

However, the most important development from the last week was the jump in the bond yields . As the chart below shows, after a short stabilization in the first half of the week, the yields on the 10-year Treasuries indexed by inflation rose from -0.79 to -0.60 percent on Thursday (Feb. 25). This surge in the real interest rates is negative for the price of gold.

Implications for Gold

What does this all mean for the price of gold? Well, the increase in the bond yields is clearly bad for the yellow metal. Although they have partially risen to strengthened inflation expectations, the real interest rates have also soared. It means that investors expect wider fiscal deficits and expanding vaccination to accelerate inflation only partially, but in a large part, it will speed up real economic growth. This is a huge problem for gold, as real interest rates are a key driver of gold prices.

An additional issue is that the expectations of higher economic growth and inflation create accompanying expectations for the Fed to tighten its monetary policy and hike the federal funds rate , which exerts downward pressure on gold prices.

This is what we were afraid of at the beginning of the year. We noted that the real interest rates were so low that the next move could be up. Importantly, there is further room for upward trajectory, as the real interest rates are still importantly below the pre-pandemic level.

However, we wouldn’t bet on the return to the levels seen last year. After all, interest rates didn’t return to the pre-crisis level after the Great Recession , so it’s unlikely that they will do it now. Additionally, investors should remember that the U.S. government is now so heavily indebted that if Treasury yields continue to increase, the Fed would have to intervene. A failure to do so would mean that the interest expenses would grow too much, creating serious problems for the Treasury. So, the current bearish trend in gold may not last forever – although it may still take some time.

If you enjoyed today’s free gold report , we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today . If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!

For a look at all of today’s economic events, check out our economic calendar.

Arkadiusz Sieron, PhD
Sunshine Profits: Effective Investment through Diligence & Care

Gold Futures Lag Far Behind the Other Three Precious Metals in Trading Today

However, at the same time, the three other precious metals that trade on the futures exchange gained value. Silver futures gained $0.19 (+0.70%) in trading today and are currently fixed at $26.625. Platinum futures gained $6.20 (+0.52%) and are currently fixed at $1191.50. Lastly, palladium futures gained $33 (+1.43%) and remained the most expensive of the precious metals complex at $2346.50.

gld 31

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pa march 1

The most reasonable explanation for why gold continues to underperform when valued against the other three precious metals that are traded on the futures complex is that gold has the least industrial usage when compared to platinum, palladium, and silver. That fact, coupled with the strong rally in U.S. equities markets today, is at the root of why three precious white metals have been consistently outperforming gold recently. It was another strong showing in all three major indexes, with the Dow Jones industrial average gaining 603 points (+1.95%), the Standard & Poor’s gained 90.67 points (+2.38%), and the NASDAQ composite gaining 398 points (+3.010%).

While it has been recent gains in Treasury yields that led to the strong selling pressure witnessed in gold last week, the primary factor moving equities higher and gold pricing lower is data that suggests that the economy in the United States is gaining momentum that is resulting in a rally in stocks on the first trading day of March.

As reported in MarketWatch, Jim Baird, chief investment officer at Plante Moran Financial Advisors, said, “Increasingly, it appears that the economy sidestepped a feared hard-landing despite a period of soft consumer spending that contributed to negative conditions for parts of the service sector and a surge in layoffs. If anything, it appears that manufacturers may have benefited from consumer spending habits that favored goods over services in recent months.”

One recent development has been the emergency use approval by the CDC of the Johnson & Johnson one shot coronavirus vaccine, which was greenlighted by the FDA last week. In fact, J&J began shipping their vaccine today, beginning with four 4 million doses. While not as effective as the other two primary vaccines granted emergency use (Pfizer-BioNTech and Moderna), the J&J vaccine is stable when stored in a refrigerator for three months and requires only one shot. Many medical professionals believe that this potentially could be key to the rural areas of the United States, which makes it difficult to ship and store the other vaccines at subzero temperatures.

These developments, when coupled with the passage in the Congress last week of President Biden’s $1.9 trillion aid package, have has shifted market sentiment towards the risk-on asset class rather than the safe-haven assets.

For more information on our service, simply use this link.

Wishing you, as always, good trading and good health,

Gary S. Wagner

 

Why Shares Of Johnson & Johnson Are Moving Higher Today?

Johnson & Johnson Video 01.03.21.

Johnson & Johnson Stock Gains Ground After FDA Approves Its Vaccine

Shares of Johnson & Johnson gained upside momentum after the company’s coronavirus vaccine was approved for use in the U.S.

The J&J vaccine is a single-shot vaccine while vaccines from Pfizer/BioNTech and Moderna require two shots. According to the data which was published a month ago, J&J vaccine was 66% effective in preventing moderate-to-severe COVID-19 and offered complete protection against coronavirus-related hospitalization and death. It is also easy to store and administer since it requires only one shot.

The U.S. purchased 100 million doses of the vaccine, and J&J plans to deliver 20 million doses by the end of March. The vaccine may also gain market share outside of the U.S. as convenience and low price are important in these markets.

What’s Next For Johnson & Johnson?

Johnson & Johnson is a huge company, and it remains to be seen whether positive vaccine news will be sufficient enough to push its stock to new highs.

J&J shares have benefited from the rotation into cyclical stocks at the beginning of 2021, but February was not a successful month for the stock.

Currently, Johnson & Johnson is trading at about 16 forward P/E which looks reasonable in the current market environment. In recent days, traders were focused on the potential inflation after the new round of stimulus in the U.S., and fears of high inflation put pressure on some high-flying stocks.

Johnson & Johnson is set to benefit from direct support provided to consumers so the stock may show some strength in case the general market moves lower on inflation worries.

Shares of Johnson & Johnson have already declined by about 8% from all-time high levels that were reached at the end of January, and this pullback may soon attract more investors who are searching for attractive stocks in the current market environment.

For a look at all of today’s economic events, check out our economic calendar.

Stocks Move Higher At The Start Of The Month

The Market Is Set To Rebound After Sell-Off

S&P 500 futures are up by about 1% in premarket trading as traders look ready to buy stocks after the recent sell-off.

The U.S. House of Representatives has approved Biden’s $1.9 trillion coronavirus aid package which will now go to the U.S. Senate. The package includes $1,400 stimulus checks which are expected to boost consumer spending and push prices higher.

The yields of U.S. government bonds began to move higher after the recent pullback as traders remained focused on the threat of higher inflation. That said, inflation expectations have failed to put any material pressure on the stock market today. Tech stocks like Tesla or Amazon look ready to rebound after the recent weakness, and the market’s mood is clearly bullish at the start of this month.

Oil Gains Ground On Vaccine Optimism

WTI oil is currently trying to settle back above the $62 level as traders bet that Johnson & Johnson vaccine will provide additional support to recovery in the longer-term.

FDA has recently approved the company’s coronavirus vaccine which is the first one that requires just one shot. This is the third vaccine which has been approved in the U.S. since the beginning of the pandemic. Pfizer/BioNTech and Moderna vaccines are distributed in two doses.

At this point, the supply of Johnson & Johnson vaccine is limited, but it will significantly increase in the upcoming months which is bullish for oil.

Manufacturing PMI Reports Show That The  Manufacturing Segment Continues To Recover

Today, traders will have a chance to take a look at the final reading of U.S. Manufacturing PMI report. Analysts expect that Manufacturing PMI declined from 59.2 in January to 58.5 in February.

Other countries have already published their PMI reports which indicated that the recovery in the manufacturing segment was stronger than expected. Euro Area Manufacturing PMI grew from 54.8 to 57.9 compared to analyst consensus of 57.7. In the UK, Manufacturing PMI increased from 54.1 to 55.1 compared to analyst consensus of 54.9.

If U.S. Manufacturing PMI exceeds analyst expectations, the market may get additional support.

For a look at all of today’s economic events, check out our economic calendar.

SP500 Analysis – A Pullback on its Way?

Fundamental analysis

Stock bulls have struggled to find fresh news last week. Economic data as of late has sent some mixed messages, with the recovery clearly expanding in some areas but still appearing stalled in others. Weekly Jobless Claims came in higher than expected and the previous week was also revised up sharply, indicating the job market is far from rebounding.

Housing Starts also disappointed a bit, falling -6.0% to a seasonally adjusted annual rate of 1.580 million last month. However, the slower-than-expected homebuilding was largely blamed on skyrocketing lumber prices and other climbing input costs. That narrative feeds right into increasing concerns about inflation, which is unmistakable in some areas like housing and food prices, and now energy prices with this week’s winter storms.

Last week also saw mortgage rates climb to their highest levels since November, averaging 2.81% for the week ending February 18, up eight basis points from the week prior. Rising mortgage rates are trailing Treasury yields, which hit their highest levels in a year earlier this week. Fed officials have been out in force talking down the risks of inflation, though, echoing the sentiments of many bulls that believe any price increases are going to be temporary, both now and post-pandemic.

The timeline for an end to the pandemic is still the second half of 2021. The Biden administration is again increasing the number of vaccines being sent to 13.5 million a week to states and will also be sending +2 million doses per week directly to local pharmacies.

So in total, around 15.5 million doses a week should now be getting distributed, with supplies expected to continue ramping up and a greater number of more doses being sent.

JNJ is saying they are still committed to supplying +100 million doses of its one-shot vaccine by June. The administration’s top medical adviser estimates that vaccines will be available readily to the general public by mid-May or early-June, and expects most all Americans (who chose to be) will be inoculated by late summer.

More housing data is on deck next week with the S&P Case-Shiller Home Price Index on Tuesday, New Home Sales Wednesday, and Pending Home Sales on Thursday.

Earnings highlights coming up next week include Berkshire Hathaway, Dell, Etsy, Home Depot, Lowes, Nvidia, Salesforce, and Square. It’s worth mentioning that Berkshire Hathaway’s vice-chairman and legendary investor Charlie Munger will headline the Annual Meeting of Shareholders of the Daily Journal Corporation next week. The event will be live-streamed on Yahoo Finance on Thursday.

Technical analysis

We have a clear channel up on the daily chart. Every time price touches its upper range we see a rejection. So, we need some really significant fundamental factors to break up above this range and sustain. Based on recent economic data it seems unlikely to happen. Moreover, based on the cycle forecast we can expect a pullback of 5 – 10% in the coming few weeks. Besides, Advance Decline Line shows early signs of weakness.

There is no strong bearish setup at the moment in SP500, but taking into account all mentioned above factors, I see a high chance for a pullback. Certainly, if the price breaks above the daily channel and sustains above it, it will be a game-changer. Other than that, we can see a retest of 3830 or even 3770 in the coming weeks.

For a look at all of today’s economic events, check out our economic calendar.

US Stock Indices Daily Recap: That Wasn’t Much of a Down Day…

Technically, the Dow and S&P snapped their 7-day winning streak.

Technically.

I hardly consider a decline of 0.03% and 0.11% for the Dow and S&P, respectively, a down day.

Meanwhile, the Nasdaq and Russell saw a record close for who knows how many consecutive days.

Can the market keep this up? Who even knows anymore. Everything seems to defy expectations and logic. Yeah, it’s possible. But I’d be surprised if we don’t see at least one sharp pullback before the end of the week.

The sentiment is surely rosy right now. The economic recovery appears to be gaining steam, and the Q1 decline everyone predicted might not be as swift as we anticipated- if at all. President Biden’s stimulus could officially pass within days as well and provide much-needed relief to struggling businesses and families.

Have you seen the vaccine numbers lately, too? More people in the U.S. have now been vaccinated than total cases. On Monday (Feb. 8), vaccine doses outnumbered new cases 10-1. New daily COVID cases have also reached their lowest levels since October.

With Johnson and Johnson’s (JNJ) one dose vaccine candidate seemingly days away from FDA approval, the outlook is certainly more positive at this point than many anticipated.

But we’re not out of the woods yet, and three non-pandemic related factors still concern me- complacency, overvaluation, and inflation.

Jim Cramer’s “Seven Deadly Sins” from Mad Money Monday night (Feb. 8) reflect many of my concerns too:

Source: CNBC

Yes, I know I keep saying to beware. I also know that earnings are on pace to rise by over 20% in 2021. Since 1980, only 12 years have earnings increased by 15% or more. Except for 2018, the market gained an average of 12% in all of those years.

But consider some valuation metrics that scream “bubble.”

As of February 4, 2021, the Buffett Indicator , or the ratio of the total US stock market valuation to the GDP, was at a level not seen since the dotcom bubble. If you take the US stock market cap of $48.7 trillion and the estimated GDP of $21.7 trillion, we’re nearly 224% overvalued and 84% above the historical average.

Keep in mind; this chart was dated February 4. This number has only grown since then. Tuesday (Feb. 9) was hardly a down day. If anything, it was plain dull.

Fears of a bubble are genuine. The S&P 500’s forward 12-month P/E ratio is back to above 22 and well above the 10-year average of 15.8. The Russell 2000 is also back at a historic high above its 200-day moving average. Tech stock valuations are again approaching dot-com bust levels.

Bank of America also believes that a market correction could be on the horizon due to signs of overheating.

While I don’t foresee a crash like we saw last March, I still maintain that some correction before the end of Q1 could happen.

Corrections are healthy and normal market behavior, and we are long overdue for one. They are also way more common than most realize. Only twice in the last 38 years have we had years WITHOUT a correction (1995 and 2017).

A correction could also be an excellent buying opportunity for what could be a great second half of the year.

Bank of America also echoed this statement and said that “We expect a buyable 5-10% Q1 correction as the big ‘unknowns’ coincide with exuberant positioning, record equity supply, and ‘as good as it gets’ earnings revisions.”

The key word here- buyable.

My goal for these updates is to educate you, give you ideas, and help you manage money like I did when I was pressing the buy and sell buttons for $600+ million in assets. I left that career to pursue one where I could help people who needed help, instead of the ultra-high net worth.

With that said, to sum it up:

While there is long-term optimism, there are short-term concerns. A short-term correction between now and the end of Q1 2021 is possible. I don’t think that a decline above ~20%, leading to a bear market will happen.

Hopefully, you find my insights enlightening. I welcome your thoughts and questions and wish you the best of luck.

Small-Caps are Officially Overbought

Figure 1- iShares Russell 2000 ETF (IWM)

This pains me to write this because I love Russell 2000 small-cap index in 2021.

But this is getting ridiculous now.

As tracked by the iShares Russell 2000 ETF (IWM) , small-cap stocks have been on a rampage since November. Since the close on October 30, the IWM has gained nearly 50% and more than doubled ETFs’ returns tracking the larger indices. What happened to the Nasdaq being red hot? This chart makes it look like an igloo.

Since the close on January 29, the Russell has done just about the same again and gained 11.10%. It’s outperformed all the other major indices by a minimum of 5% in that period.

Not to mention, year-to-date, it’s already up a staggering 18%.

Small-caps are funny. They either outperform and underperform and can be swayed easily by the news. I foresaw the pullback two weeks ago coming for over a month, and unfortunately, I see the same thing happening now. But only for the short-term.

I remain bullish due to aggressive stimulus, which could be put in motion this week.

I also love small-cap stocks for the long-term, especially as the world reopens and this Biden agenda gets put in motion. It seems like things are finally trending in the right direction.

For now, though, the index is once again overbought.

The RSI is at a scorching 75, and I can’t justify calling this a BUY or HOLD right now. It’s an excellent time to take profits.

SELL and take profits. If and when there is a deeper pullback, BUY for the long-term recovery.

Thank you for reading today’s free analysis. I encourage you to sign up for our daily newsletter – it’s absolutely free and if you don’t like it, you can unsubscribe with just 2 clicks. If you sign up today, you’ll also get 7 days of free access to the premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!

Thank you.

For a look at all of today’s economic events, check out our economic calendar.

Matthew Levy, CFA
Stock Trading Strategist
Sunshine Profits: Effective Investment through Diligence & Care

* * * * *

All essays, research, and information found above represent analyses and opinions of Matthew Levy, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Matthew Levy, CFA, and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Levy is not a Registered Securities Advisor. By reading Matthew Levy, CFA’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading, and speculation in any financial markets may involve high risk of loss. Matthew Levy, CFA, Sunshine Profits’ employees, and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

US Stock Market: Boosted by Optimism Over Earnings, Stimulus Talks, Progress in Vaccine Rollouts

The major U.S. stock indexes finished higher on Friday, boosted by optimism over earnings, stimulus talks and progress in vaccine rollouts. Wall Street wrapped up a strong week as investors hoped a disappointing January jobs report would increase the likelihood of further stimulus.

The S&P 500 Index closed higher for a fifth straight session, its longest winning streak since August. Additionally, the benchmark index and the tech-heavy NASDAQ Composite posted record closing highs for a second day.

Cash Market Performance

In the cash market on Friday, the S&P 500 Index settled at 3886.83, up 15.09 or +0.40%. The blue chip Dow Jones Industrial Average finished at 31148.24, up 92.38 or +0.31% and the NASDAQ Composite closed at 13856.30, up 78.56 or +0.59%.

Payrolls Disappoints, Unemployment Rate Improves

A smaller-than-expected rebound in the labor market last month highlighted the need for more government aid to shore up the economy. The Labor Department’s data showed job losses in manufacturing and construction, the two sectors that have been propping up the economy. Job losses in December were also deeper than initially thought.

The Labor Department said the U.S. added 49,000 jobs in January, slightly below the 50,000 payrolls expected by economists. The unemployment rate fell to 6.3%, better than projections of 6.7%. December’s numbers were revised much lower, with the month posting a loss of 227,000 from the initial reading of 140,000 jobs lost.

Solid Earnings Season So Far

Wall Street was also in the middle of a solid earnings season. Of the 184 companies in the S&P 500 that have reported to date, 84.2% topped analyst expectations, according to Refinitiv.

So far, stronger-than-expected corporate results in the fourth quarter have driven up analysts’ expectations, and S&P 500 companies are on track to post earnings growth for the period instead of a decline as initially expected.

Democrats Move Biden’s Stimulus Package Forward

The Senate passed a budget resolution early Friday, as Democrats move forward with the process to pass a $1.9 trillion coronavirus relief bill without Republican votes. The package includes $1,400 stimulus checks, a supplemental jobless benefit and COVID-19 vaccine and testing funds.

President Joe Biden on Friday warned that Republican efforts to pass a smaller bill would only prolong the economy’s path to recovery.

Volatility Eases

The CBOE Volatility Index, known as the VIX, has fallen more than 12 points this week to around 21 Friday with a speculative trading frenzy dissipating. Some on Wall Street believe if the fear gauge breaks below 20, it could send a big “risk on” signal as the level would trigger buying from algorithmic traders and other big players.

Shares of GameStop Corp, caught in the recent social media-hyped trading frenzy, was higher on Friday, after online broker Robinhood lifted all the buying curbs imposed at the height of the battle between amateur investors and Wall Street hedge funds.

Vaccination News

The Biden administration is exploring every option for increasing manufacturing of Johnson & Johnson’s COVID-19 vaccine, which is under regulatory review, and said on Friday that currently expected levels of early doses were less than hoped.

J&J applied on Thursday for U.S. emergency use authorization. It expects to have some vaccine ready for distribution as soon as authorized but has not said how much.

The White House has invoked the Defense Production Act to help Pfizer Inc ramp up COVID-19 vaccine production and that “every option” was on the table to produce more Johnson & Johnson vaccine should it be authorized.

Officials have said that one J&J’s vaccine is authorized, it would mean that millions more doses would be available to states. The vaccine is one-shot, as opposed to Pfizer’s and Moderna Inc’s two-dose vaccines, and can be stored in a refrigerator.

For a look at all of today’s economic events, check out our economic calendar.

US Stock Indices Daily Recap: Bulls on Stock Parade

Six days into 2021, the Capitol saw its first insurrection since 1814.

Two weeks later, we inaugurated a new president.

A week later, we saw class warfare before our eyes when Redditors from the “WallStreetBets” subreddit took on hedge funds and won.

After declining in two of the last four weeks, the indices haven’t seen a single down day all week. If Friday (Feb. 5) futures stay the same, we might not have a down day all week.

Bulls on parade.

Good morning investors, thanks for finally caring about strong earnings and not paying attention to GameStop (GME) (that was fun while it lasted, though).

The sentiment is rosey and for good reason. Earnings continue to crush. Some form of President Biden’s aggressive stimulus could also pass within days. Jobless claims fell for the third consecutive week and hit the lowest level since the end of November, labor market data looks strong, vaccines hit a record daily total on Thursday (Feb. 4) and could be distributed at CVS and Walgreens within days, and the 5-to-30 year treasury curve was the highest its been since March 2016.

Johnson & Johnson (JNJ) also just applied to the FDA for emergency use authorization for its one-dose vaccine. If approved, it could be game-changing.

Happy days.

My overheating and trading concerns in an overbought market remain, though, and have returned with a vengeance. I liked where many sectors and indices ended last week for potential BUY opportunities. This blazing win streak, though, is teetering on the edge of mania and overvaluation again.

The S&P 500, Nasdaq, and Russell 2000 hit new record closes yet again.

Are we in a bubble? Maybe.

I worry about complacency and overvaluation.

The S&P 500’s forward 12-month P/E ratio is back to nearly 22 and well above the 10-year average of 15.8. The Russell 2000 is also back at a historic high above its 200-day moving average. Tech stock valuations are even approaching dot-com bust levels, once again.

According to a recent Bank of America survey of 194 money managers, bullishness on stocks is at a three-year high, and the average share of cash in portfolios, which is usually a sign of protection from market turmoil, is at the lowest level since May 2013.

The market needed last week’s pullback, but it was nothing but a minor cooldown period thanks to Reddit in the grand scheme of things.

We are long overdue for a correction. Corrections are healthy for markets and more common than most realize. Only twice in the last 38 years have we had years WITHOUT a correction (1995 and 2017).

Well, hello, we haven’t seen one since last March!

A correction could also be an excellent buying opportunity for what should be a great second half of the year.

My goal for these updates is to educate you, give you ideas, and help you manage money like I did when I was pressing the buy and sell buttons for $600+ million in assets. I left that career to pursue one where I could help people who needed help, instead of the ultra-high net worth.

With that said, to sum it up:

While there is long-term optimism, there are short-term concerns. A short-term correction between now and the end of Q1 2021 is possible. I don’t think that a decline above ~20%, leading to a bear market will happen.

Hopefully, you find my insights enlightening. I welcome your thoughts and questions and wish you the best of luck.

Four Days in a Row and Counting for the S&P 500…

Figure 1- S&P 500 Large Cap Index $SPX

Have you ever rooted so hard for a team that can frustrate and excite you at the same time? Rip off a 4-day winning streak, followed by a slump of losing 5 out of 6 games, then come back with another winning streak? Does it have you questioning if the team is outstanding or a mirage?

If I could compare the S&P 500 to a team, it would probably be the Philadelphia 76ers.

This index looks like a winner and seemingly rips off multiple-day winning streaks weekly. Now and then, though, it can show inconsistency, make you scratch your head, and go on a frustrating losing streak.

Two weeks ago, the S&P was hovering around a record-high. Its forward P/E ratio was the highest since the dot-com bust, and the RSI consistently approached overbought levels.

By the end of last week, it was nearly oversold.

Now, this week? Its RSI is back above 60, we’re at another record high, we’re on a four-day winning streak (which could be five if futures remain in the green), and we’re at a forward 12-month P/E ratio at nearly 22 and well above the 10-year average of 15.8.

I said before that once the S&P approaches a 3600-level, we can start talking about it as a BUY. Well, the index came pretty darn close to it last week, but it wasn’t enough for me. Despite this week’s rally, short-term concerns remain, with long-term optimism.

To me, because of the RSI and how the index has traded, it remains a HOLD. But we’re teet

A short-term correction could inevitably occur by the end of Q1 2021, but for now, I am sticking with the S&P as a HOLD.

For an ETF that attempts to directly correlate with the performance of the S&P, the SPDR S&P ETF (SPY) is a good option.

Thank you for reading today’s free analysis. I encourage you to sign up for our daily newsletter – it’s absolutely free and if you don’t like it, you can unsubscribe with just 2 clicks. If you sign up today, you’ll also get 7 days of free access to the premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!

Thank you.

For a look at all of today’s economic events, check out our economic calendar.

Matthew Levy, CFA
Stock Trading Strategist
Sunshine Profits: Effective Investment through Diligence & Care

* * * * *

All essays, research, and information found above represent analyses and opinions of Matthew Levy, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Matthew Levy, CFA, and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Levy is not a Registered Securities Advisor. By reading Matthew Levy, CFA’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading, and speculation in any financial markets may involve high risk of loss. Matthew Levy, CFA, Sunshine Profits’ employees, and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.