Mixed fundamentals resulted in a flat trading last week. Stock bulls are betting on the coronavirus vaccines and rumors out of Washington that stimulus negotiations might be back on the table before 2021.

Pfizer-BioNTech is expected to file for emergency use authorization with the FDA today, which is nearly 95% effective. That means vaccine distribution could start happening within just a few weeks. Failure to deliver it on time can bring sell-off in stocks. Besides, even all these positive news did not help the market to break the resistance. Weekly chart has clear RSI divergence and ‘Island” pattern. Another failure to break to the upside can bring the SP500 back to 3200.

It was reported yesterday that Senate Majority Leader Mitch McConnell has agreed to resume talks with Democrats on another pandemic relief bill. However, Congress is also readying for negotiations on government funding that needs to be passed before a December 11 deadline, that, if missed, could lead to a government shutdown.

There is a lot of skepticism about whether Republicans and Democrats can successfully negotiate both a stimulus and funding deal amid the current political animosity. Nothing probably happens with any type of new stimulus until we figure out who will be sitting in the White House after January 20.

Despite coronavirus infections continuing to surge and more communities across the U.S. implement measures to stop the spread, we see strong enough economic reports..

New Jobless Claims ticked up by about +30,000 last week but the 4-week moving average fell as did Continuing Claims. The data does not indicate that the surge in Covid-19 cases is translating to widespread job losses, at least not yet.

The pandemic has certainly not been bad news for the housing market with October Existing Home Sales skyrocketing to a seasonally adjusted rate of 6.85 million, more than +26% above last year's level and the highest rate since February 2006.

Sales of homes over the $1 million mark more than doubled last month while declines were witnessed at the lowest range. Mortgage rates this week hit a new all-time record low for the 13th time this year.

With all these in mind, we can only rely on pure technical analysis. “Island” formation and bearish divergence can be early reversal signs. However, breaking above weekly resistance can result in an aggressive rally to 3900 in extension.

 

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