There is an odd sense of foreboding in the market lately. I think there is a combination of reasons.

In Roman mythology, the Goddess of depression, worry, and mental illness was called Miseria, hence the word misery.

There is no doubt as we approach one year of partial and complete lockdowns, everyone feels signs of depression, coupled with grief over the deaths of loved ones and even strangers.

To a degree, the stock market has been a shield from the madness of our current condition. In its natural role, the stock market is a harbinger of the future, and we all know the future will be brighter.

And yet lately, real-time angst has begun to creep into the stock market. 

Sure, there is natural apprehension, considering how far the market has come since the early days of last spring.  Guessing market tops have become a sensation among the brilliant experts that missed the move in the first place.

Then there is all the cheerleading for the comeuppance of the individual investor. It is so unbecoming.  -And yet, each day, it gets worse, calling  for the death knell of Robinhood traders.

Asking if their siege on those mighty hedge funds is finally over. It’s not!

How long will it take to reload and give it another try?  Meanwhile, cheering for the demise of small investors has created an aura of negativity that permeates the entire market. Rooting for the demise of others, especially the less fortunate, triggers its own kind of melancholy.

Plus, the market is a bit overbought and still digesting the latest leg of the rally.

Year-to- Date

• NASDAQ Composite: +6.2%

• Russell 2000: +5.6%

• S&P 500: +2.0%

• Dow Jones Industrial Average: +0.4%

For all the drama, it’s been a strong start to the year for the NASDAQ, which gave up big gains and actually closed close lower following the lead of Amazon (AMZN) and Apple (AAPL).

Market breadth continues to be very strong for the NASDAQ, but the number of new 52-week highs continue to languish. It is a sign of consolidation of gains, which means the rally only needs to find its next big spark.

Market Breadth	NYSE	NASDAQ
Advancing	1,854	2,391
Declining	1,345	1,475
52 Week High	138	262
52 Week Low	0	4
Up Volume	3.50B	5.83B
Down Volume	1.38B	1.58B

Message from the Bond Market

Don’t look now, but  the yield curve continues to steepen. While it only received a fraction of the coverage of the inverted yield curve in 2019, it’s time to consider some of the potential ramifications.  The yield curve between the 5-Year and 30-Year Treasuries is now 146 basis points (BPS). Implications include:

• Strengthening economy
• A faster pace of inflation growth

US30 & US5 YR Gov Yields

Interestingly, St. Louis Fed President James Bullard predicted a “very strong” economy in the second half of the year as the virus wanes. Once vaccinations have made the rounds, households will be able to tap into “exceptionally high” levels of savings and financial resources.

In addition to saying, “Fed policy has been appropriate, given the crisis that we are in,” Ballard reminded everyone that the Fed has a long way to go before even thinking about adjusting their buying.

He also took a victory lap for the team, stating: “Monetary and fiscal policies have been especially aggressive, and the associated macroeconomic outcomes have been considerably better than expected.”

Not the Daddy

Ballard said the Fed policy (all that money sloshing around) is not the ‘daddy’ of hectic trading in this short squeeze scenario. He pointed the finger at the usual speculation around markets and new retail trading platforms.

Opportunity

The steep yield curve is supposed to be great for banks that can borrow cheap and lend high. Keep  an eye on the sector, which continues to not live up to the hype. The Financial (XLF) sector recently pulled back from a perfect double top, so a breakout would be something investors want to ride.

Portfolio Review

Yesterday, we added to Technology in our Hotline Model Portfolio.

Today’s Session

Initial jobless claims fell for the third week to 779k from 812k prior week, beating consensus of 830k. While the number is still high, it appears that layoffs are easing.

Continuing claims also decreased to 4.59M from 4.79M last week, besting the consensus 4.7M. The largest increases were in Florida, Ohio, while the greatest decrease was in California, Kansas, and Georgia.

The major indices are positive at the open.

Comments

Excellent article this morning Charles. I've been kicked off Twitter so I can only say hi throu here. 👍 Denette on 2/4/2021 10:11:55 AM

Charles, thank you for your continued optimism and down to earth analysis. Last night I watched The Big Short again because I cannot help but think we are in that same sort of environment. It may not be housing this time but the market makers are doing something in the background that feels like we, the individual investors, are going to be set up again. I want no part of betting against America but if you have thought about these sort of underlying currents do you have guidance on where we can put some of our money (other than physical assets and on the sidelines)? If you think that I am just cynical and paranoid then please let me know that too. I'm just a little guy who does not have a lot of the info you are privy to. Thank you again for your work, and the best to you and your family. Tim Tim Oubre on 2/4/2021 10:19:44 AM

Thank you for your insights Charles. Ron on 2/4/2021 11:11:28 AM

Charles, Excellent market perspective, keep focus despite the high seas. For me, the most resonating comment, "Rooting for the demise of others, especially the less fortunate, triggers its own kind of melancholy." This seems to have been going on and is the divide in our nation, not just the Robinhood traders. Hope we can turn this around...it really bothers me to my core to witness. Christiana Christiana on 2/4/2021 11:13:49 AM

Look for your emails & comments Gene Oberhauser on 2/4/2021 11:24:57 AM

Is it a good time to buy gold and silver? Michael DeFelice on 2/4/2021 11:31:27 AM

We can always depend on you for straight forward easy to understand commentary. Thanks for helping we the new investors. Harold Hawkins on 2/4/2021 11:38:01 AM

Harold, Thank you very much.  CP Charles Payne on 2/4/2021 12:03:07 PM

Mr. Payne, you are one of the good guys with a heart for the individual investor. Thank you! Kathy on 2/4/2021 12:32:49 PM

I think the melancholy is about the huge change in the administration and wondering how long will the great times will last. richard widmer on 2/4/2021 1:48:36 PM

God bless you for standing up for the rights of Americans to have access to markets! Andrew Dale on 2/4/2021 2:24:39 PM

Charles, I appreciate your realistic comments about some “sieging” others and that point of view. Your are a winner, not afraid of competition or a challenge! Maybe one day everyone will see poverty, as the common enemy, and welcome the opportunity to secure wealth. Personally, I’ve missed some great opportunities too, and I’m at poolside ready to dive in...all I can say is, pleasure knowing you and being able to watch you succeed. My ear is also to the ground, and some days I also hear a stampede! Kevin O. Grier on 2/4/2021 3:56:46 PM

Charles, Thank you so much for your expertise. I loved your show on Monday when you and the Making Money guest spoke out with passion for us, the little guys. I am 68 now and a retired British Literature, Speech Debate Teacher/Coach. I love your use of literature and your study of history. I am a constant learner and that is why I have signed up for your Payne's Education classes. I am learning and I will grow my money for the future. You are a passionate man and I can tell that you love and believe in your job. Thank you for being a constant, like the North Star. Thank you for leading us through tough times with nothing but a positive attitude and positive notes. Besides my faith in Christ, bible study, prayer and growth I begin my day with your notes. We are taking care of a 39 year old son that is suffering from PTSD, Depression, Anxiety and now Neurological problems probably caused by the trauma to head in the attack. Prayers are what get me through the day. You help me through the day through your platforms and the possibility that WE WILL WIN. "Never, never, never, never, never, never, GIVE UP. ALWAYS be you and please take care of yourself because I need you to be Healthy. Love to you, Mary Jean Ackert Mary Jean Ackert on 2/5/2021 11:07:44 AM

I look to see a 30 percent gain this year. Tim Schmitt on 2/5/2021 3:44:43 PM

In addition to your great analysis of what ever is happening Charles, you share some terrific comments from other Kindred Spirits! I think we got a bunch of homies (sp) here. Great to feel you are on the same page with others some days. You're the best Charles. Lorin K on 2/5/2021 5:20:57 PM

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