Market Fails to Follow Up on Best Trading Day in Months
The action was sloppy, with the Magnificent Seven stumbling as investors seem hesitant to make moves before inauguration day.
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After the best day in months on Wednesday, the market struggled to follow through to the upside on Thursday.
The action was choppy and sloppy, with the Magnificent Seven MAGS stumbling to a loss of 1.7% and wiping out Wednesday’s gains, but the Russell 2000 IWM held up with a gain of 0.25%. The small-cap strength helped to keep breadth positive with about 5,900 gainers to 3,600 decliners.
There were a couple more positive earnings reports in the banking sector, with Morgan Stanley MS moving up 5% but UnitedHealth Group UNH disappointed and dragged down the insurance sector.
The good news is that bonds held up, and interest rates ticked down slightly, which may be a sign that inflation fears are subsiding.
The mixed market action was likely due to hesitancy to make big moves in front of Donald Trump’s first day in office on Monday. There will also be many more earnings reports next week, but most of the Magnificent Seven will be the following week.
Overall, the market action outside of the Magnificent Seven was constructive, but the failure of big-cap technology to attract interest is a concern. There needs to be much stronger rotational action; otherwise, the Magnificent Seven will drag down the entire market.
Friday should be another day of positioning in front of the Trump inauguration. Conditions are still favorable for my upside, but they are also good for increased volatility.
Have a good evening. I’ll see you tomorrow.
At the time of publication, DePorre had no positions in any securities mentioned.
