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.

S&P 500

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.

Consumer Confidence	January	December
Present	84.4	87.2
Expectations	92.5	87.0

Six Month Expectations	January	December
Business Conditions	33.7	29.5
More jobs	31.3	28.0

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.

 

Market Breadth	NYSE	NASDAQ
Advancing	1,318	1,454
Declining	1,857	2,400
52 Week High	147	261
52 Week Low	3	8
Up Volume	3.01B	3.84B
Down Volume	2.94B	2.90B

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).

• 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!

Elon Musk @elonmusk Gamestonk!! wallstreetbets • r/wallstreetbets Like 4chan found a Bloomberg Terminal reddit.com

 

Chamath Palihapitiya @chamath Lots of $GME talk soooooo.... We bought Feb $115 calls on $GME this morning. Let’s gooooooo!!!!!!!! Quote Tweet Chamath Palihapitiya @chamath Tell me what to buy tomorrow and if you convince me I’ll throw a few 100 k’s at it to start. Ride or die.

Chamath Palihapitiya @chamath I will win. Zerohedge @zerohedge It's not reddit vs Ken Griffin... It's Chamath vs Ken We have a billionaire vs billionaire rumble in the jungle

Portfolio Review

We added to Industrials yesterday.

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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.

Comments

Good thoughts Charles! I keep reading your comments everyday! Jerry Halcomb on 1/27/2021 9:56:13 AM

on cnbc/others... they allow and have daily shows allowing the likes of the najarians to come on and talk their book AFTER they have bought or sold i and others know how to pick stocks...why are we not allowed on media platforms to hype our stuff?...cuz we don't have a financil degree or employment experience with the wallst pimps?.......the game is not hard.... the Timing is the problem period! ps...you are right on...this is now a movement from the little guy.... and they/pimps will not be able to stop it without hurting themselves and they don't realize that yet prettydirect on 1/27/2021 9:56:57 AM

Great summary for the day and the time we are living in. It would be great if the growth of individual investors morphs into a political movement. I would become a part of it for sure! Christiana on 1/27/2021 10:36:22 AM

Really am enjoying your analysis and commentary! Bob Cayia on 1/27/2021 10:59:02 AM

Charles I have been a viewer for over 4 years. You, Varney and Maria are about the only broadcast I follow. You provide reliable information. Thank you. Kim Combs on 1/27/2021 11:51:40 AM

I just watched "Trading Places" again recently, so your comment about the Duke brothers is especially funny to me now. Appreciate your reassuring words of encouragement. Please keep up the good work. George Elliott on 1/27/2021 12:07:00 PM

Charles- I’m watching you right now on Fox Business. You are RIGHT and the others are wrong. Keep up your fight for the small investor!! Anne Landry on 1/27/2021 12:18:01 PM

Really great comments Charles. Keep it up Dale E. Coughlin on 1/27/2021 12:24:31 PM

Charles, I read your book. Also I read four newsletters during the month. I own green energy stocks 3, along with about 15 other different stocks. I’m in AI, Auto and cannabis also. And most of my shares are doing well. I have 7 up approximately 800 to 1800%. I have been trading since March 2020. Paul Roberts on 1/27/2021 12:52:43 PM

Your words are encouraging today, I’m so the little guy. I’ve been invested since 2010. Sometime I take charge sometimes shrug my shoulders. I’m invested in Apple and keep pulling for BA. With new president and his agenda I’m struggling with pulling out Thank you , Charles Laura on 1/27/2021 1:44:55 PM

Maybe this would be a good time to look at the corp structure in the US. Remember the days before hedge funds, mutual funds, ETF's, IRA's and 401k's and the CEO's and boards of directors worked for the share holders and the share holders vote counted. The managers of these funds live in the same area, belong to the same country club, eat in the same places, smoke in the same cigar clubs. Does anybody think they have never colluded on their trades, i.e. Mutual fund managers sell large blocks of stock at the low to buddy hedge fund manager and then buy them back at the high. let's not let these managers vote these large blocks of stocks. We have computers that can break out these voting rights to fractions. Good for Reddit and the individual investor. dave on 1/27/2021 2:12:37 PM

Thank you Charles! Tonya Trotter on 1/27/2021 6:40:22 PM

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