I just started reading the Jonathan Swift classic, Gulliver’s Travels’, along with my granddaughter. And considering the pace at which things are being banned nowadays, this might be our last chance.

The book has its controversy, including a constant analysis of its main message. Some say this is a direct rebuttal to Daniel Defoe’s Robinson Crusoe that celebrates the capabilities of man and the importance of the individual.

(When I say “some,” I mean Wikipedia.)

For my granddaughter, it’s just one great adventure that matches her swashbuckling style. She’s a smart, fearless girl. Yesterday, I thought about the book and several illustrations while I watched the NASDAQ Composite come tumbling down.

The Mighty Tied Down

I’m not big into stuff like the NASDAQ has lost all its gains since the start of the year. Unless January l, 2021 was the first day you started investing or trading, it’s an irreverent stat  (it does sound intriguing when it’s on the teleprompter).  If you are a buy-and-hold investor, this dip is par for the course. Going back even one year, the index is still sporting hefty gains.

NASDAQ Gains:

• 1 year: +41.1%
• 3-year gain: +68.3%
• 5-year gain: +170.0%

But the pace of the index has fallen, and it is frustrating. There have been giant chunks snatched out of the hottest names, erasing months of gains in a blink of an eye.

Cathartic Correction?

The folks at Bespoke Research put out a great table yesterday, covering 10% of corrections in the NASDAQ going back to 2009.  There have been so many in that time frame, it underscores how ordinary such moves had become, and how quickly the index bounces back. 

Highlight

It took only 20 days to swoon 10%, the second-fastest after the stumble in October 2011. 

Once hitting a 20% decline, the duration of down days thereafter is usually short-lived. (2018 saw 61 additional days of weakness, as Powell pressured the market with verbal miscues and rate hikes.)

Of the twelve corrections, seven saw a further decline of 2.0% or less.

Above It All

I believe there have to be extenuating circumstances for the selloff to become more dramatic. However, I believe Jerome Powell has to be the source of a course correction. As I feared, he was too cool yesterday - perhaps the Federal Reserve Chairman is Gulliver. 

He’s been cool as a cucumber, and even the little people scramble for cover and prepare for the worst.  

We are combing through our entire universe of names. A focus on creating a new, fresh buy list, especially in beaten-down Technology names, where nothing has changed except the temperament of the shareholders.

The top twenty winners on the NASDAQ are now seeing an average gain of 91%, down from an average gain of 145% a month ago. 

Technical View

The NASDAQ has plowed through the bottom of the trading range and 50-day moving average closing at a formerly pivotal number that was key resistance and support.

There are two potential support points from here:

• 11,600 200-day moving average
• 11,099 major support points

NASDAQ

Market Breadth

It’s no surprise market breadth was abysmal, and the big red flag was all of a sudden. There are more new lows than new highs on the NASDAQ. Record ratios of highs to lows have been erased.

Market Breadth	NYSE	NASDAQ
Advancing	697	614
Declining	2,593	3,522
52 Week High	159	200
52 Week Low	154	311
Up Volume	2.09B	1.50B
Down Volume	4.57B	5.98B

Cool Breeze

So, Jerome Powell says he doesn’t just focus on the ten-year yield, and he will not get hot under the collar until things get crazier. His exact words: “would be concerned by disorderly market conditions.”  Well, yesterday was seriously disorienting and the stock market can accommodate if Powell needs more to consider.

Portfolio Approach

There is no action in the Hot Model Portfolio – cash at an elevated level of 15%.

Today’s Session

Private Sector Employment Trends

The street was looking for 212,000 jobs in the February employment report instead it got 379,000 paced by the private sector, which generated 465,000 jobs.

Huge +513,000 moves in the service sector:

• Leisure +355,000
• Retail +41,000
• Temporary +52,700

Disappointing, the goods producing number, -48,000:

• Construction -61,000 (harsh weather had major impact)

Private Sector

The big beat on the jobs report put an extra bounce into the ten-year yield, pushing it to 1.63% before backing down to 1.61%

Ten Year Yield

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Comments

Good morning Charles, This morning's briefing is another example of why I am a fan and subscriber. You are always realistically upbeat with well reasoned arguments. Plus there is the "likable guy" factor: I loved reading about your granddaughter and your obvious love of family, a value we share. If you lived nearby Karen & I would invite you over for dinner so we could take turns bragging about our grandkids. (But it isn't bragging if its true). Tom Tom W on 3/5/2021 9:05:35 AM

Thanks so much Tom, that warms my heart,  I would love to come to dinner and share photos and stories.  We are blessed.  CP Charles Payne on 3/5/2021 9:31:29 AM

Hi Charles, I began investing about 5 years ago on my own. Since then I have read your book and watch your show everyday. I always appreciate your positive outlook and the strength of the US stock market. When I see a day decline and the instinct is to panic, I stay focused on my goals of long term investing, and I have learned to appreciate the opportunity to buy a dip if the fundamentals are there instead of panicking. Last March when the airlines fell and I was home with my children 9 and 4 at the time. I took the opportunity to et up custodial accounts and buy some airline stock to teach my 9 year old the power of investing. She likes jet blue so we bought that one too. It has been fun to share the progress with her. Thanks again for being a positive and inspiring voice for the individual investor. Jessica Jessica on 3/5/2021 10:15:11 AM

Wow, it is so great you did that for your daughter.  I think you empowered her greatly.  It feels so good relying on your own knowledge rather than being whipped around by the emotions of a less educated crowd and Wall Street shenanigans.  Congratulations. CP Charles Payne on 3/5/2021 10:20:11 AM

Thanks for keeping us calm in these crazy. I've only been investing for about a year but thanks to your book, listening to you and reading your daily commentary I have done very well in this first year. Thank you Harold Hawkins on 3/5/2021 10:38:05 AM

Great read Charles. I always respect and appreciate your take. Long term here... but a little disheartening right now. The "mantra" I have adopted, thank you, is own "good companies". I have only been "hammered" on my "gut feel" more speculative positions. thanks tim Tim Abbott on 3/5/2021 10:46:49 AM

Well, now you did it! I guess I have to read Gulliver's Travels again. I'll try to talk my 13 year old daughter into joining me, but might not happen! She thinks she is too old for that now days. Thanks Charles, always interesting and informative. Lorin K on 3/5/2021 10:52:03 AM

I showed the pic of Gulliver to my wife a few weeks ago and told her it was Redditt/Robin Hood crawling all over the hedge funds. Frank Manello Jr on 3/5/2021 11:13:23 AM

This is a repeat from a year ago. I took a leap of faith then and bought more. It all was good. So the new mantra should be "Sell in January, buy in April". Only time will tell. mike moule on 3/5/2021 11:42:57 AM

I'm not sure why Powell is not concerned about inflation - guess he doesn't put gas in his car or go to a grocery store. Bill Frohberg on 3/5/2021 11:43:24 AM

Charles, I love your use of Literature, Poetry, Music to help frame your teaching. I am a retired British Literature teacher and I loved anything that Jonathan Swift wrote. His writings are still relevant. I especially loved teaching A Modest Proposal for the shock factor with our High School Seniors. Still relevant in our crazy mixed up world. You are a great leader, teacher and prognosticator of the ups and downs of life. Thank you for being Charels Payne!!!! Mary J Ackert on 3/5/2021 12:19:42 PM

Thank you Charles as always for your optimistic views, happy to read that you too treasure the old classics and share them with your loved ones especially young. There is so much to learn from our past and apply to our present. Solid family unit is more important now than ever I feel, regrettably much like the timeless works of literature that too is becoming "out of style". Take good care my friend. G Georgy Sirota on 3/5/2021 1:20:39 PM

Charles, my opinion is that your granddaughter is learning how to look beyond the superficial and examine the fundamentals. The child is blessed to have a grandfather who teaches her how to use her God-given faculties instead of being told what to think. God bless you guys for a wonderful weekend. PS - terrific market stuff also 😜 Jim on 3/5/2021 1:37:53 PM

Charles, if we only had many more Charles in the world. I always thought that I had the best Grandpas in the world, but the rest of the world has now elected you. Thank you for the great example. Warmest Regards, John PS also market information John McLees on 3/8/2021 2:50:46 PM

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