Exactly four years ago this week, I wrote a column telling us to forget about politics and pay attention to financials when it comes to markets. What I learned by doing the research for that particular column was that there was no amount of political news that could rock the market for longer than a day or so.
Obviously, I looked at the Kennedy assassination, the Martin Luther King Jr. assassination, and, quite frankly, all the horrible events of 1968, and I looked at Nixon's resignation. I even checked to see if stocks cared about the Bill Clinton impeachment -- and they didn't. None of these events had any meaningful effect on stocks. What had an effect was taxes and the Fed.
So, once again, with the inauguration of a new president, I will say what I said four years ago: Leave your politics at home when investing in markets.
A week ago, we looked at the chart of the iShares 20 Plus Year Treasury Bond exchange-traded fund (TLT) for bonds. At the time, I thought we should see a bounce off that lower channel line and we got a small bounce. What I find interesting is that bonds started the day down on Tuesday and clawed their way back. Despite that, so few think interest rates are going down or nowhere. I think, regardless of the next day or so, bonds still have a bit more rallying in them (lower interest rates).
I also think the dollar can have another push upward.
As for stocks, I suppose the power of such negative sentiment from my Saturday Twitter poll was enough to send stocks rallying. Yet nothing changed in terms of the indicators or statistics. Breadth was good not great.
I wonder if I did my Saturday Poll today if the outcome would be different. pic.twitter.com/kbq8WTMLbO
— Helene Meisler (@hmeisler) January 19, 2021
In fact, the slight change was that the big-cap tech stocks found some buying come their way. That's the Nasdaq -- and by extension, the Invesco QQQs -- bouncing off that lower channel trend line. And as we know, when the QQQs get love, other stocks tend to be much more mediocre than when the QQQ stocks sit it out. They just seem to suck up all the oxygen (or cash) in the room.
For example, look at the Transports, which had a nice move, while the QQQs sat it out, now they were red yesterday. There is some support as the Transports come into the 12,700-12,750 area, but I'm going to watch to see if this either/or market can change again.
One final word on sentiment. I realize my poll is not particularly scientific, so I will note that the put/call ratio for equities has been under .40 for four of the last five trading days. That doesn't jive with my poll, so don't be surprised if there isn't a lot of follow-through on Wednesday and the chopfest continues.
