• FDM: +2.10%
• Russell 2000: +1.81%
• DJIA: +1.46%
• S&P 500: +0.60%
• NASDAQ: -0.04%
• Gold: +0.44%

There are two definitions for the word divergence. As nice I wrote this piece, I pondered for a moment, perhaps trying to make the mathematical usage applicable. But I’m not that smart. And then, the more I contemplated the market, maybe it’s more of a convergence, also-rans in the stock market have their day in the sun at the expense of the formerly super-hot-growth stocks.

But the session was further nuanced than the tale of two indices moving in opposite directions.

1. The process or state of divergent.
2. The inner product of the operator del and a given vector, which gives a measure of the quantity of flux, emanating from any point of the vector field, or the rate of the loss of mass, heat, etc.

Convergence

I find it interesting long-term investors are doing victory laps at the apparent comeuppance of the NASDAQ Composite - since the long-term performance against the S&P 500 and the Dow Jones Industrial Average is wide enough to slide into the Pacific Ocean.

This adjustment has been long in the making. It’s not an indictment of the best companies in the history of mankind, but an admission their shares may have been too far ahead. 

NASDAQ vs SPX & DJIA

Message of the Market

Big tech couldn’t gain traction all session long, and buyers needed more strength to be seduced. We came into yesterday bracing for the 10-year bond auction, and the truth is the auction wasn’t that great. 

My read on the session is the market is still looking for inflation, perhaps at a slower pace, and therefore positioned for best correlations.

Interestingly, reopening darlings struggled with small gains, even pulling back names like Royal Caribbean (RCL).  It looks like the market is looking ahead to the infrastructure bill, which is still in a nascent development with occasional trial balloons, including one that called for two trillion in spending.

I suspect the number would be north of one trillion. I’m not 100% convinced it happens even though it has more bipartisan support than the “rescue” bill passed yesterday to be signed into law tomorrow.

For now, I continue to believe investors have to be overweight in Materials and Industrial names. Crude oil is breaking out, and everyone loves Financials.

The big question is about big tech and its inability to reclaim that magic (answer below).

S&P 500 Index	+0.60%
Communication Services XLC	+0.42%
Consumer Discretionary XLY	+0.51%
Consumer Staples XLP	+1.29%
Energy XLE	+2.53%
Financials XLF	+2.04%
Health Care XLV	+0.23%
Industrials XLI	+1.48%
Materials XLB	+1.65%
Real Estate XLRE	+0.99%
Technology XLK		-0.40%
Utilities XLU	+0.68%

Market breadth was impressive, although overall volume was somewhat muted. The session underscores the fact that new highs beget new highs.

Market Breadth	NYSE	NASDAQ
Advancing	2,442	2,606
Declining	823	1,460
52 Week High	392	427
52 Week Low	14	27
Up Volume	3.94B	2.97B
Down Volume	1.68B	2.88B

Rally Broadening

Yesterday saw the greatest number of S&P 500 winners this year. And the NASDAQ is still seeing an almost 2/3 advancer to decliner names:

 S&P 500 Winners 

• 346 average gain: +17.02%
• Top twenty average gain: +62.34%      

S&P 500 Losers 

• 159 average loss: -6.11%
• Bottom twenty average decline: -14.95%

NASDAQ Winners 

• 640 average gain: +23.43%
• Top twenty average gain: +109.10%          

NASDAQ Losers 

• 359 average loss: -11.57%
• Bottom twenty average decline: -38.97%

The NASDAQ is caught in the vice grip of a downtrend that continues to foil rally attempts. Yesterday, the index closed right at a pivotal point on the charts that was key support until it failed. And now, it’s the big test and potential launching point

NASDAQ

The Stock of the Day

Word after the close is that Boeing (BA) is close to an order for  seven 737 Max Jets. It’s just the latest in a string of events that has the stock-taking off. Once, this was a must-hold-forever stock. I’m not sure it’s back to that status yet. However, it has an amazing chart, which is breaking out with a lot of blue skies ahead.

Speaking of transportation stocks, check out Avis Budget Group (CAR), which closed at $65.00, up from the 52-week low of $6.35. It’s another counterintuitive name that experts said was heading for the dustbin, not just in this crisis but also during the Great Recession. And more recently, it would be bumped by the sharing economy. By the way, there was a huge jump in rental car prices in yesterday’s Consumer Price Index (CPI) report.

Looking Back

This week a year ago, the pandemic became real, although it was still mostly surreal. The unknown was beginning to cast a shadow that eventually would become complete darkness as the nation was ordered to shelter in place. And everything physical was locked down, even as our emotions ran wild.

Early on, it was apparent these unusual conditions would take an emotional toll on the nation that will stay with us long after Covid-19 is gone. There was no blueprint. Although, I must admit Googling the Spanish Flu and wondering if we would even learn to live with the virus by wearing masks but carrying on.

We are here today. And I hope through our pain and tears that we can all look ahead to a better future, as I am sure we all have become better people.

Portfolio Approach

We are making some allocation adjustments to our Hotline Model Portfolio and adding a new position in Energy.

Today’s Session

Technology is back in vogue.  FAANG is all up and Tesla (TSLA) is up 4%. The risk on trade is happening as the 10 year yield declines again, now at 1.49%.

Initial jobless claims came in better than expected to 712, 000 versus the estimate for 725,000.  While claims however are still above pre Covid levels, this was the lowest level since November Last week was revised to higher to 754,000. Additionally, 478,000 applied for Pandemic Unemployment Assistance.

The 4 week moving average, a better gauge, declined by 34,000 to 759,000.

Continuing claims declined as well by 193,000 to 4.1 million, the lowest level of the pandemic.

Comments

Any rise in rates will be a windfall for financials. After having adjusted to the last decade or more, they are primed for big gains if rates do rise, even if just a bit. After 25+ years owning/operating a tech company (retired now), people expect too much from tech. Longevity will breed the next big play. Its just how tech works. Life lessons have taught me not to chase what the next guess will be, but rather what folks MUST have in order to make any of those future changes that will happen. Have a great day CP Z on 3/11/2021 10:09:47 AM

Your awesome Charles J.R. Whitehead on 3/11/2021 10:26:45 AM

Thanks again for an interesting comment. Your "Looking Back" section brought a smile to my face...I also googled the "Spanish Flu" to have a better understanding. Sure glad our medicine and vaccine developments have progressed since those dark days! Hanging in there with the markets, trying not to get confused by the many "talking heads" out there, mostly just talikg their own book. Thank you for giving it to us staight, Charles Payne style! Trev on 3/11/2021 10:49:00 AM

The victory lap is for the comeuppance of arrogant big-tech. The NASDAQ is just guilty by association. Most may judge them financial but I feel they are bad for democracy with their intolerance of free speech Charlie Francisco on 3/11/2021 11:07:05 AM

Hey Charles, what's this, " I'm not that smart." comment and then laying all that mathematical formulas on us. Are you just showing off! We all know you're plenty smart! Like you a lot! Thanks Charles. Lorin K on 3/11/2021 11:14:35 AM

You and coffee is the way I start my day. Thank you. Allan Fleisher on 3/11/2021 11:47:52 AM

Charles, you are too humble. I always enjoy your straight talk and analysis. I also appreciate when you give your insight on specific stocks. Several years ago I acted on one of your recommendations and purchased CF Industries. I recently sold it but it performed rather nicely during the time I owned it. Thank you! Bob Cayia on 3/11/2021 11:51:55 AM

Thank you so much Bob. CP Charles Payne on 3/11/2021 12:02:24 PM

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