Bitcoin And Tesla’s Stock Falls: A Shift In Capital Flows

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Commenting on the declines in Bitcoin and Tesla’s stock, and today’s trading, Gorilla Trades strategist Ken Berman said:

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Bitcoin And Tesla Trading Deep In The Red

The major indices are all trading lower at midday as stocks pulled back slightly across the board after hitting new all-time highs last week. The overnight session saw a clear risk-off shift in Asia and Europe, as the COVID picture continues to be grim in several European countries, but despite the bearish open, U.S. equities have been creeping higher in early trading. All eyes are on the political developments in the aftermath of last week’s turmoil, with the Democratic party pushing for the removal of President Trump before the end of his tenure.

Some of the strongest assets of the past few months are deep in the red at midday, such as bitcoin and Tesla (TSLA, – 5%), the leading stock of rally on Wall Street, while the dollar extended its rebound, suggesting a shift in capital flows. The domestic economic calendar was empty this morning but the rally in Treasury yields continued as investors remain upbeat concerning the long-term economic outlook and the Biden administration’s stimulus plans. Confirming the stimulus-related optimism, small-caps have been spearheading this morning’s bounce, with the Russell 2000 already getting close to its record high on the heels of its strong start to the year.

Market Wrap

Dow: 31,036 , – 62 or 0.2%

S&P 500: 3,811 – 14 or 0.4%

Nasdaq: 13,106, – 96 or 0.7%

Russell 2000: 2,083, – 8 or 0.4%

Market breadth has been relatively strong this morning, with decliners only outnumbering advancing issues by a 4-to-3 ratio on the NYSE at midday. No stocks hit new 52-week lows on the NYSE and the Nasdaq, while 119 stocks hit new 52-week highs. The major indices have been trading above their daily VWAPs (Volume-Weighted Average Price) for most of the morning session, pointing to intraday buying pressure. The new multi-month highs in Treasury yields are having a strong impact on the key sectors today, with financials holding up well amid the risk-off shift, together with tech and healthcare stocks, but with the real estate, utilities, and energy sectors lagging behind. Stay tuned!

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