Big Tech led the market to another inexplicable gain this afternoon as new coronavirus cases jumped by the most ever in a single day.
Doesn’t make much sense, does it? Investors have feared a second wave of COVID-19 for weeks.
Now, the first signs of it are potentially here. The U.S. reported 45,251 new cases on Tuesday while Russia announced another 9,263 according to a World Health Organization (WHO) report.
And though the WHO has done little during the pandemic to establish itself as a reliable source of advice, it’s been somewhat accurate in tallying COVID-19 infections as reported by countries not named China.
The total number of confirmed cases has officially hit 5 million worldwide.
Still, stocks continue to climb despite the sobering realization that a full-scale U.S. economic reopening will be difficult. Moreover, that even with America “open for business,” it could take years before we’re back to pre-coronavirus levels of productivity.
Investors don’t seem to know that, or they simply don’t care.
That hasn’t stopped the Federal Reserve from airing its own concerns, though. In the newly released April Fed meeting minutes, officials commented on not only the short-term implications of the pandemic but the longer-term effects it could have as well.
“Participants commented that, in addition to weighing heavily on economic activity in the near term, the economic effects of the pandemic created an extraordinary amount of uncertainty and considerable risks to economic activity in the medium term,” the minutes said.
Fed officials also spoke about what would result from a second wave of COVID-19, should it reemerge in the U.S.
“In this scenario, a second wave of the coronavirus outbreak, with another round of strict restrictions on social interactions and business operations, was assumed to begin around year-end, inducing a decrease in real GDP, a jump in the unemployment rate, and renewed downward pressure on inflation next year,” the minutes read.
In other words, the market seems like it should be tilting bearish – something that obviously hasn’t happened.
A correction could absolutely arrive very soon, but for now, bulls continue to buy.
That should mean big things for tech stocks, some of which sold-off last week but made a major comeback.
Snap Inc. (NASDAQ: SNAP) is a great example of this. The stock, known for its social media app, Snapchat, fell from its peak set on May 11th.
After spending several days beneath the 10-day moving average, SNAP shares erupted today, closing above both that same moving average and the stock’s minor bearish trend (represented with the yellow trendline).
Now, SNAP sits atop a higher low and serious positive momentum.
For those reasons, it might make sense to take SNAP long should it rise above today’s high with a trade trigger of $18.34.
Equities look absolutely due for a correction, but so long as the going’s good for tech stocks, there’s no reason to turn a blind eye to otherwise great trade setups.
Especially ones on stocks that were able to “shrug-off” a falling market in the past, just like SNAP did (multiple times) with ease.