As the saying goes, the market can remain irrational longer than you can remain solvent. And what’s happening now is that the big players are being pushed around – David plagues Goliath, if you will – by the legions of day traders, who use services including the Robinhood investment app to make stocks higher.
That’s the theory of Michael Batnick, research director at Ritholtz Wealth Management and author of the Irrelevant Investor blog. “These traders go from stock to stock. They squeeze out all the juice until there’s nothing left and then move on to the next one, ”says Batnick.
He points to this JPMorgan chart of the companies with the most short positions in the Russell 300 RUA,
rising higher. “I can’t prove that the digital merchants are the culprits, but I don’t think it takes a giant leap of faith to make the connection,” he said.
Batnick recorded this viral video of a young couple sharing their investment strategy on TikTok. (If you don’t click the link, the guy says he buys stock when they start to rise and sells when they stop. Momentum trading, in other words.)
What’s different this time? The network effect. “This is a huge community now, and if we’ve learned anything over the past ten years, we have to be careful about shorting networks. There are non-monetary considerations at play here, such as belonging. And fun. Did I mention they have fun? “Batnick says.” I don’t think these people can keep making money forever, but I don’t see the idea that it will end when they disappear. “
The buzz
Supreme Court Chief Justice John Roberts will swear by Joe Biden as the 46th President of the United States. The inauguration will be a minor affair due to the COVID-19 pandemic, with about 200,000 flags replacing the people in the National Mall. Vice President Mike Pence will represent the outgoing administration. Biden also announced a series of first-day executive actions he will be taking, including re-joining the Paris climate agreement and the World Health Organization, and halting the construction of the US-Mexico border wall.
In one of his last acts of office, President Donald Trump pardoned 73 and commuted the sentences of 70, including former adviser Stephen Bannon, Republican fundraiser Elliott Broidy, and rappers Lil Wayne and Kodak Black. The corporate world pardoned Anthony Levandowski after stealing trade secrets from tech giant Google’s GOOG,
self-directed program, as did Gregory Reyes, the former CEO of Brocade Communications, who was the first to be convicted of reversing illegal stock options.
Notably absent from Trump’s list was a member of his family. Joe Exotic, the star of the Netflix series Tiger King, was also not pardoned after renting a limo awaiting release from prison.
Netflix NFLX,
Shares were up 14% in premarket trading after the streaming service reported 8.5 million new subscribers in the fourth quarter and said it no longer needs to fund programming out of debt. Consumer product giant Procter & Gamble PG,
at the top of earnings expectations, such as Morgan Stanley MS,
rounded off the earnings season for the Wall Street banks by beating both the top and bottom line estimates.
Internet giant Alibaba BABA,
9988,
rose in Hong Kong trading after founder Jack Ma first appeared in public, at a charity event, since meeting with Chinese authorities about the cancellation of Ant Financial’s IPO.
Tesla TSLA,
rose when Oppenheimer reportedly raised his price target for the electric car manufacturer to $ 1,036.
Short selling research firm Citron Research will present a video game retailer GameStop GME,
which will double in price in 2021. In a tweet, Citron said GameStop buyers at this level are “suckers at this game of poker.”
The markets
US Equity Futures ES00,
pointed to a stronger start, with the tech-heavy Nasdaq-100 NQ00,
contract first.
The return on the 10-year Treasury TMUBMUSD10Y,
was 1.10%.
The graph
Ned Davis, the senior investment strategist of his eponymous Ned Davis Research, says the market looks sparkling, but the rise will continue. The percentage of stocks making new highs weekly has risen, while the percentage of stocks making new lows has remained low, he said. Historically, new highs peak 36.5 weeks before the market does. He agrees that the market looks extensive compared to the long-term trend. But it’s not as extensive as 1929 or 2000, he says.
Random reads
Pink seesaws on the US-Mexico border have won a design award.
A stolen 500-year-old painting that may have been created by Leonardo da Vinci was returned to a museum, unaware that the artwork was missing in the first place.
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