It was definitely a good day for the stock market...as the S&P, Nasdaq and Russell 2000 all closed at record all-time highs. We must say that the “internals” of the market weren’t all that great. The breadth for the S&P 500 was 3.4 to 1 positive...and it was just 3 to 1 positive for the Nasdaq Composite & NYSE Composite indexes. Again, those are not horrible numbers, but you’d like to see something above 5 to 1 positive on a day when the market was up more than 1%.
HAVING SAID THIS, the “internals” were better than they were on a couple of other days this week...and the S&P Equal Weight index rallied just as much as the S&P did yesterday (after lagging on several days earlier in the week). That equal weight index did not make a new record high like the S&P 500 did, but it’s less than 1% below its January all-time highs, so there is not a big divergence right now...and thus it’s not something that is raising a yellow flag.
This is a long-winded way of saying that this week’s rally in the stock market has been a good one, BUT that the less-than-stellar “internals” is telling us that the upside follow-through could be limited as we move through the rest of February. In other words, the stock market has simply retraced the losses that took place during the GME (et el) short squeeze that created a mini de-leveraging process the previous week. Therefore, it is not a lock that the stock market is going to see more upside follow-through.
Let’s face it, it’s great that earnings are going to be a lot better than they were in 2020...and that we’re seeing some signs of better economic growth than last year. However, since 2020 ...