I’m not sure if investors were rubbernecking the impeachment drama in Washington, bracing for earnings season, or baffled by that complex multi-team trade that landed James Harden in Brooklyn. There were a lot of distractions or inaction in yesterday’s trading. The thing is, there were still a lot of pockets of excitement, including another monster short squeeze that sent shares of GameStop (GME) up more than 57.0%.  

Blue-chips were listless, although advancers edged out decliners. Conversely, while decliners beat out advancers on the NASDAQ, there was decisively more up volume than down volume, which tells me conviction remains with the buyers.

Micro Power

I just think they are having trouble finding stuff to buy. It is getting a little harder, but the great news is there are still opportunities. But you have to cast a wider net and dig a little deeper. Small-caps continue to roar, but micro-cap stocks are up even more.  

Of course, Wall Street pros will warn this is a sign of the apocalypse, then six months from now, you’ll read endless stories of market “pros” loading up on micro-cap stocks:

• iShares Micro-Cap ETF (IWC): +8.79%
• Russell 2000 (RUT): +6.9%
• Nasdaq Composite (NASD): +1.9%
• Dow Jones Industrial Average (DJIA): +1.5%
• S&P 500 (S&P): +1.4%

We are looking closer at these names, which are higher than the normal risk we  assume in the Hotline Model Portfolio. But there are solid companies that are worth owning.  

By the way, the micro-cap rally iShares Micro-Cap ETF (IWC) has been in place for the past six months.

IWC

Money Changers

Another theme yesterday was the action in Financial Technology or Fintech. Those businesses that move money around act great. PayPal (PYPL), Apple (AAPL), and Mastercard (MA). (I bet you thought it was the Financial sector) that helped the tech sector to a solid session:

• (INTC) Intel Corp                            
• (PYPL) PayPal Holdings Inc.       
• (QCOM) QUALCOMM Inc                
• (NOW) ServiceNow Inc.                
• (AAPL) Apple Inc.                             
• (STX) Seagate Technology             
• (CRM) Salesforce.com                     
• (VNT) Vontier Corp                    
• (ZBRA) Zebra Technologies     
• (MA) Mastercard Inc A   

Portfolio Approach

We and took profits in an Industrial position yesterday in the Hotline Model Portfolio, and our adding a new position this morning in Consumer Discretionary.

Today’s Session

US futures shrugged off President Trump’s second impeachment and focused instead on a report that President Joe Biden will unveil a new $2 trillion stimulus program later in the day.  He is scheduled to speak at 7:30pm ET. Fed Chairman Powell is scheduled to speak today as well at 12:30pm ET. Other bankers scheduled to speak include the Fed’s Rosengren, Bostic and Kaplan.  

On the economic front, initial jobless claims in the U.S. rose to 965k, surpassing the consensus of 789k, and the prior week was revised to 784k, and surging to a 5 month high. Continuing claims rose to 5.27M, topping expectations for 5m. There were 284k people applying for PAU ( Pandemic Unemployment Assistance).

Investors are also shifting their attention to earnings season, with results from JP Morgan (JPM) and Citigroup (C) due out tomorrow.