Tuesday stocks were down a little and Wednesday they were up a little. Yes, a repeat of the past 6 weeks for the NYSE indices and SOX. A slow walk laterally, holding the highs hit in December, but after pricing in the hope of economic growth policies to come, investors and traders are watching the inauguration to see if it will yield actual policies and not just hope. After all, we all saw how well hope worked for the economy the past 8 long 1970's and 1930's-like years. I know, pretty heavy stuff for an introduction, but it fits with a heavy-ish market trying to hold gains and get to something more substantive policy-wise.
And yes, the inauguration can very well be the important factor. Today the story is the new President has '6 or 7' executive orders ready to go on Friday, and what those are and how far they go can very well set the tone for the actions coming. Thus, that could act as the next triggering market event.
Definitely no market triggering event on Wednesday. Stocks started higher, faded negative in a fast drop, worked laterally into the afternoon session, then managed a recovery into the close. The lower to not so lower action, despite inducing major boredom, still shows that underlying upside bias, that hope as it were, in the market. Again, not enough to break it higher on a broad basis, but enough to hold the gains while waiting for something to provide the trigger.
SP500 4.00, 0.18%
NASDAQ 16.92, 0.31%
DJ30 -22.05, -0.11%
SP400 0.43%
RUTX 0.46%
SOX 1.42%
VOLUME: NYSE -14%, NASDAQ +1%. More lower volume lateral move continues.
A/D: NYSE 1.2:1, NASDAQ 1.3:1. Massively narrow breadth yet again, matching the market indecision or decided slog laterally.
Another move to nowhere, but in going nowhere perhaps the indices are heading somewhere. Of course they are. This range will yield a breakout or a breakdown. If earnings and action such as that of NFLX afterhours dominates, the move will be a breakout. NFLX beat earnings and revenues and is up 11 points. Not all stocks are NFLX of course, not by a long shot, but if enough of these favored stocks make nice moves, the rest of the market follows.
The day saw higher consumer prices overall and at the core as rents surged 4.0% year/year, pushing overall shelter costs up 3.6% year/year. TGT slashed guidance with a worrisome retail earnings warning while LOW (Lowe's) announced 2400 full-time worker layoffs.
At the same time Chairman Yellen explained in a speech how monetary policy works and what its goals are. Funny, I did not hear her mention anything about aiding pushing the middle class below 50%, punishing savers with 0% interest rates, playing at least a 50% role in widening the socioeconomic gulf between the very rich and the very poor to all-time US highs in her speech. I wonder if she forgot to read that page.
The Fed's beige book cited 'modest to moderate' growth, everything is coming up great, blah, blah, blah. Of course we know the Fed does not believe this, or at least should not, but that is the company line, the legacy builders working together in the administration and Fed to make sure history smiles upon them.
For surely, even though we are told things are good and given 'proof' in the form of the hourly earnings, we know that is false. Weekly earnings are the key because hourly earnings reported each money are too easily skewed. Those rose just 0.2% in December year/year, the slowest since June 2014. For reference, when the current President took office real average weekly earnings were growing at 2.5% year/year, this in the teeth of the Great Recession. In at 2.5%, out at 0.2%. Impressive indeed.
Then there was smokin' Joe Biden, outgoing VP, who in his farewell speech sounded the same as China's premier in his Davos address, i.e., lamenting how the recent rise in UK, US, and smaller EU country populism could disrupt the carefully planned globalism the ultra-wealthy had labored so hard to achieve. That is something when the US Vice President, second in line for the leader of the free world, and the head of communist China make the same arguments as to how the world should run. That in itself should demonstrate to anyone who remembers anything from the 60's to 80's how much the US has shifted its position. And no, the communists in China have not changed at all; they are just pragmatic and are masters at controlling the populace. Oh yes, and Joe announced he is running for President in 2020.
In any event, none of that impacted markets. We didn't buy anything, closed some WLL (January options and a strong gain), POT (lost on that one as it went to pot), and some NFLX (133.62 position, took half off). Afterhours NFLX, as noted, is paying off. Sure we sold some of one of the positions (had already taken some gain on the older position), but that was a calculated move and it will still pay off handsomely.
Thursday you start looking for something to possibly happen. The market likes to start leaning into an event. Of course into the election it was not leaning but falling over. Man, still wish it would have opened 700 points, even 500 points, lower. Alas. In any event, we will see if BABA and others, e.g. GOOG, some chips can start new moves. Thursday metals were already starting moves and we will look at some of them to potentially ride higher if the 'Trump is going to get it done' rally starts anew after this 6-week indecision consolidation.
Have a great evening!
Jon Johnson, Chief Market Strategist
InvestmentHouse.com
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