Baking a Heckuva Cake

The phrase, "baked in the cake," refers to the concept of markets being able to discount a future scenario which may not yet seem apparent. When said scenario materializes it may come as a surprise to a fair amount of people but not so much to markets which have already accounted for the development. 

Applied to the current landscape, markets in genera appear to be baking, or pricing, in a scenario where the economy comes back reasonably fast and the pandemic drifts into the rear view mirror. We have seen countless overnight gaps higher in the major indices, alternating among themselves which ones will lead and which will lag seemingly on a daily basis, including today as we head towards the FOMC later today. 

But when we apply the baked in the cake concept to an individual name, it is perhaps less sanguine. GILD, the big biotech with its hot Remdesivir drug for coronavirus, is up nicely today. However, GILD is still a few points below last week's highs which strikes me as a bit suspect--If this drug truly is a major positive step in what has been a one-sided battle against the novel virus, then why is GILD not acting like it is akin to a silver bullet and sprinting higher anywhere from 10-20%? 

As for the broad market, headed into the FOMC today during the cash sessions, followed by FB MSFT NOW TDOC TSLA earnings tonight, among many others, it is safe to say that the market has been pricing in an increasingly bullish scenario for most firms and the economy. 

The question now becomes what will happen as the actual, true scenario unfolds in real-time and how accurate markets were in forecasting it. 

On the QQQ ETF daily chart, below, to update a chart we looked at yesterday, note how the $218 level is still shaping up a the main hurdle to clear for bulls.