For approx one week – this tiny “bricks and mortar” gaming retailer dominated just about every financial headline…
And it’s easy to understand why…
When a stock price goes from $20 to a high of $482 in a couple of weeks… people are going to take notice..
The thing: what goes straight up … inevitably comes straight down.
All things GameStop aside – it was a wild week on Wall Street.
Markets saw their biggest weekly fall (4%) since last October… with the “fear index” surging almost 50%
Technical traders will be closely watching the 10-week moving average this week – as a break often means more selling ahead. More on that in a moment…
A little known $1B brick and mortar retailer known as “GameStop” is dominating every financial news headline…
And for good reason… the retail trader is taking on Wall Street at their own game… and winning (for now).
Hedge Fund “Melvin Capital” is reported to have lost ~ $7B as a result of retail traders forcing the firm to cut their losses… and it could be just the beginning.
November and December have been filled with investor optimism.
News of vaccine and fiscal relief have propelled the market to new highs.
It’s clear skies ahead (apparently)…
And whilst this may prove true – things appear extended in the near-term.
Put another way – it feels like there is a lot of “pull forward”.
Dow Theory posits that the stock market is on the upswing when the Dow transportation average and the Dow industrial average make new highs, either at the same time or shortly after one another.
It is predicated on the idea that in an economy, transports deliver what industrial companies produce, and so one index will move in tandem with the other…
Two things worth watching this week:
(1) possible “bridging” deal (partial stimulus) from Congress; and (2)
sentiment from the Fed’s last meeting for the year. Both could be market moving…
Major investment banks are bullish on 2021… very bullish. This comes as global markets achieved $100 Trillion in market cap. Thanks central banks! Without “free money” – we would likely be at “half” that level. $100 Trillion is also 115% of global GDP… you might also say 1.15x sales.
The November jobs report was far worse than expected. The U.S. economy added only 245,000 jobs in November — well below the 500,000 that many economists hoped…
The trading story for the past 30-days (or so) has been all about the reflation trade.
You might also say it’s the return of beta names – where almost a year’s under-performance is now translating into over-performance in a very short space of time. Here’s my pick for one of the best “value” stocks… INTC
2021 optimism is in the air. Why? Look no further than rates and yields. This is a zero rate environment or negative in real terms. As such, when it comes to stock valuations – with borrowing costs so low (bond yields at record lows) – future earnings should be discounted at a lower rate which implies corporate valuations should be higher
