What to consider if you’re looking for guidance

In this article, Mish Schneider, director of trading research and education at MarketGauge.com, addresses the factors that helped the markets gap higher Monday and what factors investors should keep watching.

Last Friday, the market ended on a cliff-hanger.

The Nasdaq 100 [QQQ] closed under its 50-day moving average (DMA) while the S&P 500 [SPY] and Dow Jones [DIA] teetered on the edge of their 50-DMAs.

Not only did the market gap move higher Monday, but the QQQ ended the day back over its 50-DMA.

Talks of stimulus and a new vaccine approval for Johnson & Johnson helped the market stay over a pivotal area.

In fact, it was the perfect boost of news since the biotech sector [IBB] had broken down a considerable amount throughout last week.

Though IBB did not have a huge comeback Monday, it stopped the bleeding.

Additionally, the biotech space will need to clear back over its 50-DMA at $160.85 to get back on track if the market continues its upward trend.

Another factor in last week’s price breakdown was US treasury bonds [TLT], which surged on Friday.

Speculation that the US Federal Reserve will increase rates due to inflation is always in the back of investors’ minds, and any cause for alarm can ignite the flame of volatility.

While this is inevitably the case, for now the Federal Reserve has stayed accommodative with rates.

The push for more stimulus and for a possible infrastructure bill implies that the major concern for the Fed is not inflation, but the unemployment rate.

It is common economic thought that increasing the flow and trade of money is like increasing a country’s overall wealth.
With that said, rising inflation will need to be addressed at some point.

Continue to watch the short-term yields as well. Considering they came down a bit on Monday, they can still turn out as a party pooper if either stimulus or some other firm action by the Fed does not happen in the near future.

This article was originally published on MarketGauge. With over 100 years of combined market experience, MarketGauge's experts provide strategic information to help you achieve your investing goals.