Weighing The Week Ahead: Does The Reddit Rebellion Threaten Investor Portfolios?

We have a big week for data, including both ISM reports and a focus on employment. Investors thirst for more data about the strength of the economic rebound. We are also in the heart of earnings season, worried about vaccines, and wondering if Washington will provide more help.

Despite this jam-packed agenda the financial media highlight a story that is much more fun. Someday our focus can return to data and earnings. For now, many are worried, asking: How will the Reddit Rebellion affect my investments?

Last Week Summary

In my last installment of WTWA, I provided some insider tips on the political dynamics that would affect the economy and our investments. These are proving quite accurate as the story plays out.

Key Charts

I always start my personal review of the week by looking at some great charts. This provides a foundation for considering news and events. Whether or not we agree with Mr. Market, it is wise to know his current mood.

Market Story

I am featuring Jill Mislinski’s chart of the market week. Her approach combines several key variables in a simple readable format.

Sector Trends

Sector movement is another important clue to market trends.

Once again, Juan Luque provides us with some words of wisdom from the Incline trading desk, often a different perspective from my own:

The S&P 500 finished this week with a loss of 3.31%. The news this week were mostly focused on the heavily shorted stocks chosen by the Reddit forum “Wallstreetbets”. The volatility created by the spike in some of these names pushed brokerages against the fence. The Energy sector posted the biggest loss in the week among all sectors in the index with over a 6.6% loss. The sector lost over 3% on Friday alone and started losing momentum as it moves along the leading quadrant. The Materials and Industrials sectors were down over 5% and 4% respectively and continue trailing along the weakening quadrant. The remainder sectors were also in red for what has been the worst week for the index since October.

Comment

The market lost 3.3% on the week with a trading range of 4.8%. You can monitor the spike in volatility in my Indicator Snapshot, featured in the Quant Corner below.

Personal Note

As I do on occasion, I am evaluating the content and format of WTWA. I have a commitment to focus on topics of the greatest interest to individual investors. I also have limited personal bandwidth. Much of the work relates to data updates that are often not relevant. I will be doing some experimenting, including reducing the number of posts.

Noteworthy

Corbin Advisors regularly surveys industry professionals to get their viewpoints before the start of earnings season. The results are always interesting, but especially so this quarter. The word cloud shows the change of attention throughout a very eventful year.

The News Overview

Each week I break down events into good and bad. For our purposes, “good” has two components. The news must be market friendly and better than expectations. I avoid using my personal preferences in evaluating news – and you should, too.

My continuing assessment is that many of the normal economic indicators are not helpful in the wake of the COVID lockdown decline. Too many sources are focused on a change in direction, even if very modest, which has painted an overly optimistic picture. As the economy stalls, there will be a rapid switch in the diffusion indexes. The early signs are emerging. I expect some dramatic shifts over the next month or so.

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Disclosure: This material has been distributed for informational purposes only. It is the opinion of the author and should not be considered as investment advice or a recommendation of any ...

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