[Chart courtesy of MarketWatch.com]

1. Moving the markets

After the relentless march higher over the past 6 trading days, it was time for a pause. That is exactly what we saw today, as the major indexes dropped early on, recovered, and then hung around their respective unchanged lines. Only the Nasdaq was able to eke out a green close, albeit a tiny one, as the chart above shows.

Yet, despite this trip to nowhere, some of our holdings bucked the trend thereby turning this day into a positive one. Given its YTD history, you will not be surprised to hear that SmallCaps (IWO) ruled with another solid showing of +0.72%, which was closely followed by MidCaps (IWP) with +0.54%.

Even GLD managed a green close for the second day in a row by adding +0.34%, supported by a sliding US Dollar and lower bond yields.

With market optimism continuing unabated, BofA Research had this to say:

“Among the pillars of this unprecedented bullish sentiment is the market’s pricing in of perfection on the policy front (maximal Fed accommodation, smooth fiscal passage of $1.9tn and more, and a steady vaccine rollout) while improvement from economic data may already be “as good as it gets”.

Then this word of caution and a suggestion:

Bank of America said a market correction could be on the horizon as the recent runup has shown signs of overheating, but it will be a buying opportunity for equity investors.

If all else fails, that’s how you cover both sides of the equation.

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[Chart courtesy of MarketWatch.com]

1. Moving the markets

While spending the day in the green, the major indexes vacillated but managed to find more upward momentum during the last hour of the session and ramped into the close.

The gains were solid with the Nasdaq leading the pack with +0.95%, yet it was outperformed by SmallCaps (IWO), showing again who the top dog is with an astonishing +2.38%.

A rare but not unexpected advance came from the precious metals sector, as Gold finally managed to put up a good number by adding +1.11%, thanks to in part of the US Dollar’s dive.

Today’s bullish mood came on the heels of last week’s outstanding showing with traders remaining optimistic about additional Covid stimulus and an ongoing nascent economic recovery.

The Dow and the S&P 500 scored record highs with both indexes now having risen for six days straight, which represents their longest streak since August. However, SmallCaps deserve most of the attention, as its benchmark has now surged some +15% in 2021.

Adding to economic hopes, strategist Tony Dwyer of Canaccord Genuity noted:

“While the economy is likely in a short-term stall as vaccinations roll through the population, it would take an epic unforeseen failure in the rollout of the various vaccines to prevent the domestic and economic engine from ramping greater than most expect.”

However, let’s not forget the main contributor to the relentless upswing in equities, namely the mind boggling trillions of dollars in liquidity sloshing into the markets, as ZH called it.

One analyst, Larry MacDonald, described that phenomenon like this:

“The combo of a near $1 trillion check and $120 billion monthly QE is the monetary equivalent of eating a banana split after downing an Italian hero sandwich. The market will be stuffed with reserves.”

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[Chart courtesy of MarketWatch.com]

1. Moving the markets

With the benefit of hindsight, yesterday’s stagnant session turned out to be the springboard for today’s advances, during which all three major indexes scored solid gains of more than 1%. Despite last month’s stumble, the S&P 500 has come back with a vengeance and has now scored its 4^th positive day in a row, while hitting a new record high in the process.

Despite the Nasdaq’s +1.23% gain, it only placed third in today’s race, after being outperformed by MidCaps (IWP) with +1.63% and SmallCaps (IWP) with an astounding +2.05%.

A better-than-expected report, though still horrific, for first-time unemployment insurance claims, showed a total of 779k new claims for the week, which was below the estimate of 830k.

Overall, the mood on Wall Street was optimistic, as the vaccine rollout, along with the easy monetary policy and more potential fiscal support, AKA loads of printing new money, will support earnings, which I turn will propel markets even higher.

“We believe that we are still in the early stages of a new bull market, transitioning from the ‘hope’ phase to a longer ‘growth’ phase as strong profit growth emerges,” Peter Oppenheimer, chief global equity strategist at Goldman Sachs, said in a note.

Still, on the stimulus front, the tug-of-war goes on with the Dems moving forward with Biden’s $1.9 trillion Covid-19 relief proposal, while the Republicans are leaning towards a more modest $618 billion package.

Can’t wait to see who the winner will be.

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