Stocks have a wild day as tech names surge ahead of the earnings reports. Will GameStop continue to squeeze out shorts? Let’s talk about this and other stock market news
~Long Post~
Hello everyone and Good Morning! So, let’s start with the recap of yesterday as we saw a wild stock market, with the markets starting off in the green before having a drop in early morning trading but eventually finishing off with the Nasdaq Composite gaining 0.69%, the SP500 rising by .36% while the Dow Jones lost 37 points as the VIX rose by almost 6% and was even over 26 at one point.
We finished the day with 55% of the companies declining on average volume with the number of companies above the moving averages remaining pretty much the same as 7 of the 11 SECTORS actually finished in the green, with Utilities and Consumer Staples leading the way while Energy was the biggest laggard, dropping just over 1%, but recovered from the lows of the day.
Large-Cap Growth Companies were outperforming the markets while the rest of the groups were underperforming as big tech managed to stay positive through the lows as you can also see in yesterday’s HEAT MAP, with Apple, Microsoft & Tesla leading the way, while Banks & Industrials joined the Energy sector in losing ground.
Today we start the day off with Redbook chain store sales, the Shiller Home Index, Consumer Confidence and a lot of earnings reports from the likes of JNJ, 3M, as we also have possible volatility in Li Auto, GE, Freeport and Plug Power, before the big tech earnings start to trickle in after-hours with AMD, Microsoft & Starbucks
I’ll be watching to see what JNJ may announce on their vaccine progress while AMD will be under the spotlight to see if they manage to continue to take market share from Intel.
In some other stock market news, we continued to see GameStop having a wild ride, with the stock touching $144 before dipping below $65 for a moment and eventually finishing up almost 20% higher for the day, as the battle of the short’s vs WSB continues. This has become a major battle with multiple names like BlackBerry, AMC and other heavily shorted stocks also gaining massive in the last days & weeks.
And though I don’t encourage anyone to seek such high and fast returns, these events can last long enough to break the short-sellers as this event can keep on going for an unknown period of time before the fundamentals of the company retake center stage, so don’t try and fight the market, if you don’t seek high volatility, it’s just better to avoid getting to much exposure to these names.
You should seek long-term capital gains, as you can see here, the probability of you having negative return keeps getting lower and lower the longer your time horizon gets. You can just gamble and have a 54% chance of having a positive gain in any random day, but as you move the time-frame along, that chance goes to 94% if you invest for 10years which is pretty much as safe as you can get in money investment, as staying invested is the best way to go, just look at this chart through March, staying invested had turned 1$ into over 15$ in under 30 years, while missing the 25 best days only managed a return of about 5$. But missing both the best & worst 25 days did have a higher return, though timing the market is nearly impossible as markets can act irrational for a very long time and you might start to wonder when is the actual time to sell or buy, while in reality, no one knows what the markets will do in the short-term and trying to predict that is pure speculation and a waste of time that could be used for long-term investing.
You can also see that there isn’t any political effect usually to investing, as the probability of the stock market rising in any year doesn’t depend that much on what is the year of the term of the current president, though you can see a slightly bigger chance in the first year of a Presidential term.
And one last thing I wanted to talk about is the type of assets I think are best suited for the current situation. As you can see the SP500 has largely outperformed most other asset classes, but I think this might change this year, with small-caps being more exposed to an improving economy and international stocks benefiting from further QE easing in the US, which will make the dollar weaker, thus increasing the returns you can get in international stocks.
So, let’s hope for a good day in the markets as the US FUTURES are pointing to flattish open, with the Dow Jones leading the way.
Thank you everyone for reading! Hope you enjoyed the content! Be sure to leave a comment down below with your opinion on the stock market!
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