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The only thing able to push the markets above water since the coronavirus took hold of the globe has been the $2 trillion stimulus package.
It's the largest economic stimulus in history, and its Senate passage last Wednesday handed the markets a 10% pop after hitting lows not seen since 2016.
Before the bill, the government lowered interest rates to zero, pumped U.S. dollars in to boost liquidity, and started repurchasing bonds - but nothing pushed the markets upward like the stimulus bill, designed to help both businesses and individuals cope with the effects of the coronavirus.
The three-day jump in markets was exciting, sure, especially after so many days of red in a row. But the "stimulus overdose" did not last. On Friday, the market's three-day rally ended on news that the United States now led the world with the highest number of coronavirus cases.
Then Monday, the Dow rallied over 600 points - about 3% - on a few "good" news items, like Johnson & Johnson (NYSE: JNJ) announcing that it has identified a lead coronavirus vaccine candidate and Italy reporting its lowest number of new cases in almost two weeks.
However, this sentiment isn't sticking, with the Dow down Tuesday.
Instead, hedge funds and money managers got a second chance to "rebalance" their portfolios by cutting risk. The week of upward movement was simply a swapping of securities from institutions to the retail public.
About the Author
Tom Gentile, options trading specialist for Money Map Press, is widely known as America's No. 1 Pattern Trader thanks to his nearly 30 years of experience spotting lucrative patterns in options trading. Tom has taught over 300,000 traders his option trading secrets in a variety of settings, including seminars and workshops. He's also a bestselling author of eight books and training courses.