A Sleepy Week For The Indices?

For once, we have a week in 2021 where the market really didn't move all that much.

Except for weed stocks that whipsawed GameStock-like and Bitcoin and Dogecoin making waves thanks to Lord Elon, it's really been kind of a boring week for the major indices.

The S&P and Nasdaq closed at another record high Thursday (Feb. 11), while the Dow barely retreated from its own record high. The red-hot Russell has lagged this week.

However, it’s all relative. No index has moved upwards or downwards more than about 0.30% week-to-date.

It’s about time we had a week of relative quiet in the market.

The sentiment is indeed still rosy right now. The economic recovery appears to be gaining steam, and the Q1 GDP decline everyone predicted might not be as sharp as we anticipated. We could also be days away from trillions of dollars of much-needed stimulus getting pumped into the economy.

Earnings continue to impress, too and are on pace to rise by over 20% in 2021. Since 1980, only 12 years have earnings increased by 15% or more. Except for 2018, the market gained an average of 12% in all of those years.

We could also days away from FDA approval of a one-dose vaccine from Johnson and Johnson (JNJ).

The COVID numbers and vaccine trend could truly turn the tide of things. More people in the U.S. have now been vaccinated than total cases, and the week kicked off (Feb. 8) with vaccine doses outnumbering new cases 10-1. Dr. Fauci also claims that vaccines could be available to the general public by April.

But we're not out of the woods yet. Sure this week has been calm.

But it’s almost been “too calm”.

I still worry about complacency, valuations, and the return of inflation.

“You wouldn’t know it from the sedate action in the averages,” but Wall Street is on “a highway to the danger zone,” CNBC’s Jim Cramer said.

“In a frothy market, stocks will have enormous rallies that are totally disconnected from the underlying fundamentals.”

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Disclaimer: All essays, research, and information found above represent analyses and opinions of Matthew Levy, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be ...

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Erikas Ivan 2 weeks ago Member's comment

Thank you Matthew. So now Bank of America also validates your outlook for an inevitable buyable correction soon. Oh, and now every stock begs Lord Elon to mention it on Twitter, is this guy an oracle?

Matthew Levy, CFA 2 weeks ago Author's comment

This is just kind of typical of market excesses. There are going to be pockets of the markets that behave irrationally far longer than you would think, as well! Yes, it's nice to get some chatter from the big banks like BoA saying similar things to I have in the last few weeks, but even they are unsure. I've played in these types of markets for a long time now though, and given some indications we're seeing and the massive disconnect between the economy and stock market highs, there's bound to be a correction sooner rather than later. As Cramer (Mad Money) said last week, "No one has ever gotten burned by taking profits"