Daily Summary – March 12, 2021 - Tech Off Again, But Stimmies Are Coming

   Daily Summary – March 12, 2021  - Tech Off Again, But Stimmies Are Coming

The on again off again action of tech was off again today as the 10-yr yield pushed to a new recovery high of 1.64% and like clockwork NDX led to the downside finishing down around nine tenths followed by Naz at around six tenths down, while SPX and RUT on the back of value stocks, pushed to gains of one tenth and six tenths respectively. All finished with gains for the week though with NDX finishing last at a 2.4% gain, SPX 2.6%, Naz 3.1% and RUT lapped the field up 7.3% (and closing at the highs of the week, very strong).  But what a difference a week makes.  Last week the average ARKK stock was down 9% for the week.  This week up 10% and six over 20%. So definitely a bounce back week for growth despite the not great finish. As noted value did best pulling the left two columns into positive territory.  Bias to small over large. 

Technically, even with the small gains both SPX and RUT are edging back into those old channels they fell out of last week with RUT pushing to an ATH. NDX and Naz not as great as they did fail at the 20-day MA's that we noted yesterday putting them in sort of no man's land between MA's. Will be interesting to see how they trade Monday (but more on that at the end).

While the gains were much more muted, encouragingly the SPX sector flag looked a lot like yesterday's with actually one more green sector (nine total) with, again, four sectors up over 1% (RE, inds, utes, and fins) although none over 2% (tech was yesterday which was the worst sector today and along with comms were the two red sectors although neither down more than seven tenths of a percent).

Utes capped a strong week with another gain (they've been up 5 of last 6 days) now pushing up to just under the 100-day MA. RE up to just under its highest ever close, staples over its 100-day and has clear sailing to test its ATH, and industrials and fins pushed up to ATH's.  

But things are starting to get a bit frothy in quite a few sectors.

In key subsectors semi's finally broke their streak of +-3% with a 1% loss. Also less dramatic action in bios which were down less than 1% while transp and retail were up over 1%. 

Breadth continued to look solid with 67% of volume and 55% of issues positive NYSE and 55/52 respectively Naz.  For a day with muted gains SPX/RUT and solidly down Naz that is very good buying volume in my book.  So that continues to be support for the markets I think.

Outside of equities we covered the down day in long bonds (yields up) above. Today's action was attributed in some circles to primary dealers (mostly banks) starting to get ahead of a possible expiration of a rule that allows them to keep larger than normal amounts of Treasuries on their books at a "zero" risk weighting. While one can first ask why the US Gov't applies a risk weighting to its own debt, the bigger issue is if this is in fact happening, it's something that the Fed will hopefully address next week as I think they absolutely have to extend the risk weighting rule and if banks are getting in front of it sooner the better.  The alternative is to force liquidate a huge amount of Treasuries just as the Treasury is force feeding even more into the market. Talk about higher yields.

Outside of bonds, crude continued its consolidative action finishing red with an inside day (today's action inside of yesterdays), joined in the red by nat gas which fell to a new 45-day low (although remains above the trendline from last summer), and VIX which is now sports a 20-handle and is at a one-month low. On the green side were the dollar, gold, and copper all with mild gains.

Next week data picks back up a bit.  For sure I'll be doing reports on retail sales, industrial production/capacity utilization, NAHB, building permits and starts, jobless claims, Philly Fed, and the LEI.  Earnings season winds down but we do have couple hundred reports next week with a few big ones here and there. Also we'll get a Fed meeting and presser that has a little more intrigue than the past few.  Some topics that I would expect to be addressed are the risk weighting rule noted above as well as maybe some clarity on what yield the Fed would step in at but that is probably too much to ask.

Overall, I continue to be encouraged by the breadth.  In addition, we continue to see some sentiment/positioning numbers coming in at levels indicative of future gains.  I showed Ned Davis yesterday.  Two more are below. 

And while I continue to not dislike growth stocks (and have started to add them back after basically completely selling out other than core positions in AMZN, GOOGL, etc.) I continue to like value here even if it is probably due for a pullback.  We all know about the tailwinds from reopening, etc.  But an additional one is that they're now going to start being included in momentum indexes. Banks in MTUM?  It's coming. 

But for next week, I have one word. "Stimmies" (although I hate the word).  We're about to put hundreds of billions directly into the hands of retail investors.  Some will go into bank accounts or pay for some stuff, but Deutsche Bank estimates that the new inflows into the stock market could total around $170 billion based on a survey that found that on average recipients plan to put 37% of any stimulus checks directly into equities.  And make no mistake, they likely won't wait long.  After the last stimulus Americans that earned between $35,000 and $75,000 traded stocks about 90% more than the week prior to receiving their stimulus check. 

And that retail activity is making a bigger difference in the markets.

And sure a lot of it will go into Bitcoin and the TSLA's, ARKK's, etc., of the world but expect to see some action in the most speculative areas of the market as well. Penny stock volumes have soared.

So while I have some concerns about valuations 

For next week at least, absent something out of left field (that retail sales report might be one to watch, there's been a lot of buzz about a weak number, and the Fed is always a crapshoot) I can't help but expect we'll see stocks moving up.

We'll find out soon enough.  Have a great weekend.

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