From Barron’s -
Investors are looking ahead to Friday, when Congress is expected to vote on a $2 trillion economic relief bill. Much of the market’s rally this week has been attributed to the bill’s progress. The bill is expected to pass, though bipartisan hopes to do so as quickly as possible could be slowed down by a rogue lawmaker, according to The Washington Post.
The Dow rose 6.4%, while the S&P 500 index was up 6.2% on Thursday. The Dow, up 17.6% this week, is on pace for its best week since August 1932. S&P 500, up 14%, is on track for its best week since October 1974.
“You could almost smell the burning shorts on Wall Street today, but as credit spreads remain wide, one has to wonder how much ‘real’ buying is behind this week moves, besides the bailout-induced short-covering,” Gorilla Trades strategist Ken Berman wrote, referring to investors that sell borrowed shares to bet on a stock’s price decline.
It hasn’t been all good news. The Department of Labor said 3.28 million Americans filed for unemployment benefits last week, Berman noted, which was well above expectations. Meanwhile, the Cboe Volatility Index (VIX), closed at 61, which according to Berman suggests a high amount of investor hedging. He added that Thursday’s levels were still much higher than the VIX’s peak during 2018’s sell-off.
“The ‘fear gauge’ is still well above its 200-day moving average and its surging 50-day moving average, and although volatility likely hit its cycle-high last week, the calm bull market days aren’t coming back to Wall Street anytime soon,” he wrote.
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