Commenting on the House approving Trump’s impeachment and today’s trading Gorilla Trades strategist Ken Berman said:
The Underlying Bullish Trend Confirmed
Despite the mixed day for stocks today’s low-volatility consolidation was confidence-boost for bulls. The dollar pushed higher while overseas risk assets struggled today, so the fact that stocks didn’t resume Monday’s selloff once again confirmed the underlying bullish trend.
After 10.1% Return In 2020, Mohnish Pabrai Changes Strategy [2020 Letter]
Mohnish Pabrai's flagship hedge fund, the Pabrai Investment Fund II, returned 29.6% in the second half of 2020. Following this performance, the fund returned 10.1% net for the year, underperforming the S&P 500 but outperforming the Dow Jones Industrial Average, which returned just 9.7%. According to a copy of the investment manager's year-end letter to Read More
We had another divergent day at the level of the main sectors, as the stimulus-fueled rally in small-caps paused, cyclical issues pulled back once again following yesterday’s promising rally, but financials performed better than energy stocks and industrials despite the drop in Treasury yields. The defensive healthcare sector and the rate-sensitive utilities and real estate stocks led the rally while Intel (INTC, +7%) and stay-at-home stars Amazon (AMZN, +1.4%) and Netflix (NFLX, +2.7%) pulled their weight in the relatively strong tech sector.
The most lockdown-sensitive issues were under pressure throughout the session and the bearish COVID headlines weighed on the broader market as well. While infections were down in the U.S. and globally, in line with the usual weekly fluctuations, the number of deaths hit a new maximum and hospitalizations remain very high as well. The coming days will be crucial in gauging the severity of the post-holiday bump in the number of cases which could be crucial for the short-term direction on Wall Street.
Trump's Impeachment Trial Could Cause Political Turmoil
The Russell 2000 showed relative weakness for the first time in almost a week today as investors took profits ahead of the unveiling of the details of the new administration's economic plans. The fact that President Trump’s impeachment trial could cause political turmoil in the crucial first months of Joe Biden’s presidency raised concerns too, but today's drop is unlikely to stop the monster bullish trend in small-caps. The Russell is still just a tad below its record high and its year-to-date performance shows how strong the buying has been in the sector.
We will have a relatively quiet Thursday, in terms of economic releases, but the stocks market might remain very active, with all eyes on President-elect Joe Biden. New jobless claims are expected to be virtually unchanged at 785,000 while import prices are forecast to increase by 0.7%. Fed Chair Jerome Powell is scheduled to give a speech in the afternoon, and following today’s disappointing words from the President of the ECB any hint of further stimulus measures could end the dollar’s bounce. Stay tuned!
- The major indices edged higher in quiet trading despite the record number of COVID-related fatalities in the U.S.,with only the Dow losing a bit of ground
- The Democratic House majority approved the second impeachment of President Trump due to his involvement in last week’s riot
- Consumer prices ticked higher in December, in line with expectations, defying the impact of the virus
- Italy, one of Europe’s most fragile countries could be headed for another political crisis as two ministers are set to leave the nation’s government
- European Central Bank (ECB) President Christine Lagarde reiterated the bank’s economic projections despite the new confinement measures in Europe
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Decliners outnumbered advancing issues by a 5-to-4 ratio on the NYSE today, with 52 stocks hitting new 52-week highs and no stocks hitting new 52-week lows, while volume was slightly below average.
Price Action Gauge ******** (reading for 01/13: 76)
Price action improved markedly on Wall Street, easing the fears of a sustained risk-off period, as today’s gains proved that the “buy-the-dip” strategy is still very popular despite the COVID-related worries.
Oversold/Overbought Gauge ******** (reading for 01/13: 45 Color: green)
The key momentum indicators continue to drift sideways due to the choppy days on Wall Street, so the large-cap benchmarks remain firmly in overbought territory, and a more meaningful pullback still can’t be ruled out.