E US Stock Market Weekly Review Jan. 25 – 29, 2021

The US stock market closed lower this week, with all major stock indices falling more than 3%. Dow Jones and S&P 500 turned their performance negative for 2021. There were two selloffs during the week, one during the FED interest rate announcement and one on Friday, January 29, 2021.

What caused this selling pressure this week? Is it justified? Last week I wrote “Irrational stock moves such as the GameStop Corp. (GME) surging on no apparent news, shows that speculation is apparent related to specific stocks, therefore a lot of prudence is suggested for rational investors.The answer to whether the stock market can continue to move higher at these record highs is hard to answer. Earnings can be a catalyst for a move higher if they beat estimates. But valuation is too stretched, especially for tech stocks.”

News about speculative mania in stocks with no fundamental news and surging prices in their stock prices are strong signs of pump-and-dump schemes, which are illegal. I believe the SEC must make a thorough investigation and press charges to the forums and persons that present stock trading to be too easy and ignoring the risks of stock picking. Manipulation in any stock price is both illegal and should be dealt with utmost prudence, plus fines by the regulators. The stock market is not a casino.

The FOMO trading effect is also too dangerous. I believe that the valuation of many stocks is irrational, and investors have started realizing that profit-taking is too important not only at these high record levels for major stock indices but at any time.

News by the Fed that mentioned economic growth is moderated and that the economic recovery is not only dependent on the covid-19 but also the progress on vaccinations were more than enough for this selloff this week. Economic news showed that the GPD growth was less than expected. Overall, the economic growth is still fragile. And realizing that 2021 may be another bumpy road for stock investing despite vaccinations has a lot of odds.

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Disclosure: I have no position in any stock mentioned

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