U.S. Market Wrap & Forecast for Tuesday

U.S. equity bulls took control on the first day of February, lifting the Dow Industrial Average back above 30,000. SP-500 and Nasdaq-100 indices recouped short-term losses, closing at or above Friday highs after holding support going back to November. Short squeezes on beaten-down small caps faltered, dropping GameStop Inc. (GME) more than 40% while silver stocks and futures picked up the slack, lifting the less-loved precious metal to an 8-year high.

Monday Wrap-Up

Tesla Inc. (TSLA) bounced above 800, gaining around 6% on the session. Alphabet Inc. (GOOG) and Amazon.com Inc. (AMZN) booked strong gains ahead of Q4 reports after Tuesday’s close. SP-500 index bounced at the 50-day EMA, completing the first test since the November breakout. Moderna Inc. (MRNA) gave back gains booked after Dow component Johnson & Johnson (JNJ) disappointed investors with 66% vaccine efficacy last week.

Silver replaced Gamestop as a media obsession on Monday, with retail traders ‘allegedly’ pouring into equity and futures plays. Rather, it feels like big money is now moving the small fry, giving them the illusion of ‘democratization’ while hanging them upside down to shake out quarters. A history lesson might help at this point, with Net bubble survivors recalling that 95% or more young ‘market wizards’ blowing out their accounts in the 2000 to 2002 bear market.

The Week Ahead

This is January jobs week, with the ADP employment report in Wednesday’s pre-market and Non-Farm Payrolls on Friday morning. It’s been a terrible winter in the United States due to the pandemic so little improvement in the weak employment situation is likely. However, the market is discounting at least six months into the future and analysts expect dramatic improvement in the second half of 2021, after vaccines work their way through the population.

Market seasonality shifts to ‘bearish’ after the first day of a new month, predicting consolidation of Monday’s gains into mid-week. It feels like short squeeze momentum is winding down, with Reddit pumps hitting an invisible wall of inertia, driven by regulators and brokers seizing control of the ticker tape. You have to worry about Robinhood traders hanging onto exposure at this point because their market days could be drawing to a close.

For a look at all of today’s economic events, check out our economic calendar.