The first trading day of 2021 was bright red for the indexes, but the action under the surface was not that bad.
Breadth was around 2,650 gainers to 4,800 decliners, which is routine for a pullback, and nearly 800 stocks were hitting new 12-month highs. I had a long list of stocks that were up more than 10%, and many of those who were hit hard in the morning had bounced back by the close.
The issue Monday was the same issue that impacted the market action last week -- the calendar. Many of the moves that are being made right now are because of taxes and positioning. We also have inflow from 401(k) and other retirement plans in the new year's first few days.
An additional complication is the Georgia run-off election. The market had celebrated gridlock back in November, and there will be some concerns about the end of the filibuster and increased taxes if the Democrats take control. Democratic Sen. Joe Manchin of West Virginia is a possible "firewall," but the Democrats would chair all Senate committees if they win in Georgia.
There is likely to be some dancing around to the political news, but only two things matter to the market. First and foremost is liquidity. It looks like there is plenty of it from the intraday action Monday, and that is the fuel to keep things running. The second issue is progress on the Covid vaccine. The market has not bought into the gloom and doom of the Covid crisis despite the alarming numbers. As long as there is progress, that should continue to be the case.
We have another day or so when the calendar will be an issue, but by the end of the week, the dynamics will shift and we'll have a better idea of this market's real character. So far, it is still looking quite positive.
Have a good evening. I'll see you tomorrow.
