What a difference a weekend makes. The market was gliding along nicely, but the underpinnings were deteriorating going into last week. Conditions were perfect for a pullback when angst over the Robinhood/GameStop saga leaped from the financial pages to the front page.

But just like that, the market was oversold.

Although conventional wisdom on the Street is calling for a more substantial pullback, s the pendulum of fear quickly shifts back to the fear of missing out (FOMO). There is a ton of dry powder out there, and it’s always eager to go to work – more so after slight pullbacks.

Mega growth names were the unsurprising big winners of the session:

• NASDAQ: +2.55%
• Russell 2000: +2.53%
• S&P 500: +1.61%
• DJIA: +0.76%

Market Breadth

Market breadth was remarkable, especially on the NASDAQ, where advancers outpaced decliners more than 3:1.

Once again, the big sign of conviction came from the up volume with an almost 5:1 ratio above the down volume.

Market Breadth	NYSE	NASDAQ
Advancing	2,522	3,027
Declining	702	880
52 Week High	89	132
52 Week Low	2	16
Up Volume	4.33B	5.64B
Down Volume	1.04B	1.22B

Technical Challenges

Despite the big bounce, major indices are having big technical challenges this week. The S&P 500 is straddling on the wrong side of its three-month trading channel that failed to hold last week. Getting back in there and holding suggest a major near-term upside.

S&P 500

Beyond the sizzle of mega-cap stocks, keep an eye on sectors and names associated with the “manufacturing renaissance.”  It’s not getting the press of the housing boom, but it can help your portfolio.

More Good News

Covid-19 is moving in the right direction while and vaccines continue to gain momentum. New cases appeared to have peaked in late November (at a double top). It is great news for the nation; even better for industries that need the nation to return to normalcy.

 

Portfolio Review

We added to Technology yesterday and Industrial name today, and we are fully vested in the model portfolio.

GameStop Saga

GameStop’s (GME) saga at Robinhood didn’t get any better yesterday, even as the retail brokerage raised an additional $2.4 billion. It’s all a feeling of ‘too little, too late.’ And their handcuffs on the ability to buy certain stocks are adding to the pressure and even their misery.

Limits on Buying GME:

• At the start of trading: One Share
• Early Trading: Four Shares
• Afternoon (after cash infusion): 200 shares

GameStop (GME) was hit in after-hours trading, as hedge funds could smell blood in the water - knowing the inability to buy, coupled with downward pressure, puts many in a bind.

Obviously, a lot of investors traded the stock on the way up, but there is a large contingent that has pledged to stay the course. I have several stocks that have been held for years, but I also like to take sharp monster gains off the table.

Controlling that aspect of investing and trading is really difficult. Perhaps this is one of the hardest aspects of investing, in addition to taking losses.

As for the Robinhood debacle, I hate what’s happening visa-a-vis changing the rules in the middle of the game.

Speaking of shadowy, it’s Groundhog Day, and after this massive snowstorm, I hope we get good news on a shorter winter.

Today’s Session

It’s off to the races again this morning as the major indices continue the rally from Monday, with the S&P 500 rising above 3,800.   Silver slid from an eight-year high, as the latest short squeezed reversed.

Comments

WSB sub reddit Since realizing a gain by WSB, et al, would actualize the transfer of the criminal's wagered billions, wouldn't "diamond hands" automatically give those criminals a greater chance of lessening the transfer/loss ? The funds have lawyers and judges. Math has to give is the date the funds can no longer breath. (Interest chokes the fund at some point.) Jay Emerson on 2/2/2021 11:26:08 AM

Charles, its up to you. I feel like we have fake news all over the place. How can the Reddit army be pushing the price of silver up when all over Reddit everyone is say not to buy silver that it is a trap. But every person on TV was saying it was Reddit. Help!! who do I belive?? I think you are an honest broker of Stock News. Help me please!!!!!!!! David L Allen on 2/2/2021 11:39:17 AM

I just listened to Gasparino on Cavuto make a fervent defence of hedge funds and Steve Cohen in particular. I am appalled in equal parts by his gullibility and ignorance. Larry Smith on 2/2/2021 12:39:28 PM

Thank you Charles, for all the time and energy you put in to teach. It is very much appreciated. dh Don Herrmann on 2/2/2021 7:32:12 PM

Thanks so much Don.  It really has been a tough couple of weeks.  Beyond markets I was in high demand for my rants last week (someone had to be honest about the unfair playing field and unassuming whining of Wall Street Titans and their sycophants) I also moved into a new home. But I will always have your back.  CP Charles Payne on 2/2/2021 7:34:35 PM

Hi Charles, I love your show! I made a lot of money with large cap growth for awhile and then I switched to small caps a few months ago....great results again! Do you have a recommendation for the immediate future ...for a category for 401K stocks? Thank you very much, sir! Dan Cantrell on 2/3/2021 7:56:52 PM

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