U.S. Market Wrap and Forecast for Tuesday

Major index benchmarks traded above Wednesday’s highs at the close of Friday’s U.S. session while market players waited for Congress to wrap up the second Trump impeachment trial and get back to handing Americans the greenbacks needed to bankroll struggling Robinhood accounts.  Crude oil futures posted another round of new highs while the WTI contract closed in on 60 and bonds rolled over, testing 11-month lows.

Disney Lower After Earnings Pop

Dow component Walt Disney Co. (DIS) reversed after spiking above 195 in Thursday’s post-market, drifting into the red when analysts struggled to understand why collapsed movie, theme park, resort, and cruise ship revenue hasn’t weighed more on results. Disney+ added over 20 million subscribers during the quarter but a sweet Indian deal lowered average income per user more than 20%, suggesting the mouse is using the majority of free capital to hire accountants.

Tesla Inc. (TSLA) sold off within five points of range resistance and bounced back over 800 but this support test may continue next week. Many analysts believe the stock is over-priced at current levels and weak performance so far in 2021 could signal an intermediate correction that drops into strong support near 500. Whatever happens in coming weeks, the first quarter’s risk-free market probably won’t define the ‘2021 market’ by the end of December.

Holiday Weekend

U.S. markets are closed on Monday for President’s Day. That means mid-quarter options expiration will evolve over four sessions, instead of five. Small cap short interest plays that went crazy during Gamestop’s ramp are finding some buying interest, suggesting higher volatility than usual into next Friday’s closing bell. Congress will interrogate Robinhood, Melvin, and Reddit executives on Feb 18, ensuring the topic will impact trading through end of the 1^st quarter.

Beyond the democratization of world financial markets, traders are squarely focused on free money in the form of $1,400 stimulus checks. The bar has been set so high by Democrats that any disappointment could drop major benchmarks 5% to 10%, despite the complacency you’re feeling right now. Smart money is not only pressing momentum plays at the moment but they’re also hedging bets, waiting to capitalize on the sheer stupidity of the immature trading crowd.

For a look at next week’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication.