Market Stalls And Reddit Trolls

Markets held for most of yesterday’s session but finally gave up the ghost with half an hour remaining in the session. In a flash, all the major indexes, including the S&P 500, stumbled into the close. The fact they were up at all was intriguing, considering the ugly market breadth.

The market edged higher on results from the latest on Consumer Confidence. It came in better than expected, although severely bifurcated. There was a lot of angst about present conditions and growing optimism about the nation six months from now.

Softening Underbelly

Something happened after January 20^th, as the market has seen fewer winners and deteriorating market breadth. 

On the 20^th, there were 340 winners in the S&P 500 and 775 on the NASDAQ. At the close, the tally was 300 and 712, respectively.

Could it be major investors closing those positions and playing the squeeze game, or are the bulk of them moving to the sidelines?

Market breadth has been negative in three of the last four sessions, and yesterday was the second-worst session of the year based on internals.

Conviction

The one theme that continues to stand out is the nature and conviction seen in volume. The up volume, especially on the NASDAQ, is extremely bullish and explains the overall resolve seen in the market.

In addition to the conviction edge of buyers over sellers, the overall market momentum is still firmly entrenched.

It has been reported that since 2013, when 90% of the components in the S&P 500 are trading above their 200-day moving average, it becomes an unstoppable locomotive over the next 12 months. (according to Strategas Research).

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• Average gain: 8.6%
• Median gain: 8.6%
• Max: 22.0%
• Min: -7.5%
• Positive: 99.2% 

Short Saga

More names joined the short squeeze party yesterday. All eyes continue to focus on GameStop (GME) -which erupted after the close as two heavyweights chimed in positively - as old Wall Street continues to circle the wagons.

Elon Musk, who loves to stir up trouble and to take shots at the establishment, borrowed a phrase from Dave Portnoy of Barstool Sports and stock trading fame and claimed stocks or “stonks” only go up, which pissed off Wall Street big time.

Chamath Palihapitiya, who many consider being the next Warren Buffett, put his money where his mouth is and bought the Feb 115 calls. I love that because 99.99% of those railing against short squeezes and retail investors do not have the nerve to put a penny against this movement. Just talk!

Portfolio Review

We added to Industrials yesterday.

Today’s Session

After the close, there was an array of earnings releases with most beating the Street but faced a tough audience after they had already rallied into releases.

Microsoft (MSFT) is holding up nicely, but even the gains are less than one would expect with that monster beat.

Look for investors to rally around what I’m calling the new comfort food of the market – mega cap names like Microsoft (MSFT), Amazon (AMZN)  and Apple (AAPL). There is a fair amount of selling on the –earnings- news as well.

The Financial Media is Upset with Individual Investors

The media frenzy has been so intense, I think it’s helping to drive everything, but those short squeeze names, lower.   My thoughts in a tweet I put out couple hours ago.

Charles V Payne

@cvpayne

The same financial media that allowed shorts free reign to bash stocks to hell for years are now calling folks with $1,000 in a #RobinHood account a cartel.

Trying to illicit sympathy for folks who made billion crushing stocks and pay the lowest taxes rates isn't going to work

Lifelong Endeavor

I have been an evangelist for individuals to invest in stocks for three decades.  My great frustration has been the embedded fear of so many that they’ll lose all their money.  So they watched, even as the wealthiest people in America gained more wealth and influence from their exposure to the stock market.   

The main reason for this trepidation comes from industry messaging, including most of the financial media, which reinforces the notion that if you do want to invest you cannot go it alone.  Hand your money over to an expert, and if you are lucky, they will put you into stocks of companies you know are hot because you use the products and services.

But last year, something happened in this nation where individual investors decided to buy even as the experts were screaming to sell.   That was the Boston Tea Party moment of investing.  And ever since that moment, the experts have ridiculed individual investors and openly rooted for a market crash. 

Note, a major swoon would also help their own underperformance appear more marketable.

This kind of effort to keep people in their lane is getting old and has become very transparent.

Folks that have attained the rarefied air of financial success sure spend a lot of time dissuading others from even attempting the same achievement.  I didn’t hear a pep from these folks when XOM was losing $102 billion in market value last year.  Nobody was called stupid, and there were no warnings “this is going to end badly.”

Same with WFC losing $100 billion, AT&T (T) losing $74 billion, Chevron(CVX) losing $68 billion and Boeing (BA) losing $61 billion in market value.   And you can bet the pros that stuffed these names into retirement accounts still enjoyed giant salaries and still got their bonuses.

Moreover, this same crowd said not to buy Amazon, Netflix (NFLX) and Tesla (TSLA) and so many others – warning there is no E in the PE. 

I have seen shorts reign destruction for decades, so I have no symphony for them – they are big boys and girls.  I get how joyous it feels for the little investor to push back on the Duke Brothers crowd and hear them scream “turn those machines back on!”

(Pause) But my worry now is they are saying turn those machines off. 

The powerful forces that get to pay much lower taxes than a bus driver, are making phone calls right now that could see the rules changed mid-game.  If that happens, I hope this individual investor movement morphs into something even more powerful – a political movement.

A lot of people have already made a ton of money.  And some will lose a chunk, but I think something has been unleashed that could be a force to be reckoned with forever. 

By the way – the market does not end with the next correction or crash – it only starts all over again.  But I think more individual investors know that now more than ever before.