Friday’s Selling Continues Into Today

On Friday, the S&P 500 finally closed below its 50-day moving average. This halted an impressive streak which started in April.

The 50-DMA may have been a key indicator for the bears because the selling has continued to today. The S&P 500 has been down as much as 2% today.

I have a simple way of looking at the “lockdown trade.” Just look at Zoom and Disney. I originally meant this as a joke (“The Elfenbein Lockdown Index”), but it does have value. The two stocks tend to move oppositely. Why? Because Zoom prospers if the economy is locked down while Disney prospers on a re-opening. It’s that simple. Today, Zoom is up by 5% while Disney is down by 3%. So lockdown worries are back.

Financial stocks are doing particularly poorly today. That’s also causing value stocks to do worse than growth stocks. Most every sector is down but the cyclicals are down the most while the defensive stocks are down the least. A few stocks like Walmart and Costco are in the green today.

Shares of Nikola are getting absolutely trashed this morning. The company went public in June. A few days ago, a research company, Hindenburg Research, released a scathing report which claimed the company misled investors about its technology.

The report is titled, “Nikola: How to Parlay An Ocean of Lies Into a Partnership With the Largest Auto OEM in America.” Not much for subtlety. The company responded, but the research firm was unimpressed.

Early this morning, literally at 2:21 am, the founder of Nikola announced his resignation via Twitter. Shortly after its IPO, Nikola got to $94 per share. This morning, it’s been as low at $24 per share.

This is also a good example of how markets should work. Short-sellers are often attacked by companies, but short sellers can also root out misstatements by management. They help keep the system honest.

Posted by on September 21st, 2020 at 10:27 am


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