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Weekly Economic and Stock Market Commentary – February 8, 2021


As for the stock market specifically: 

I don’t know what was better – the Wall Street rally last week, or the way the Tampa Bay Buccaneers supported my premise last week that you just don’t bet against Tom Brady.

The metaphor I use consistently since I first started writing this commentary in 2002 is that “Defense Wins Championships.” It was clear that Tampa’s defense was up to the job.

As much as I enjoy sports, and played them over my life, I realize you don’t come here to get sports news, so I will stick to commentary on the stock market and economy.

There was strength in nearly all market sectors last week, as well as in international markets.

There are some consistent movements I see in my charting. First, growth stocks continue to lead value stocks. Second, small company stocks are rising faster than large company stocks, and even emerging markets have gained strength.

Something interesting came in my research reading. Last week saw 2 days where zero stocks hit 52-week lows.

The market risk indicating bullish percent all had a very strong week. The Optionable Bullish Percent index went back on offense. The OTC Bullish Percent Indicator gained more than six percentage points, but remains on defense since this chart counts only even numbers.  It remained a fraction away from turning positive by the close of our time-period, Sunday night. The NYSE Bullish Percent Indicator needs a bit of help to turn around.  The nature of the evidence says we remain in WEALTH PRESERVATION mode. (FYI, both OTC and NYSE Bullish Percent charts did move to offense after Monday’s trade).

Remember, Xs mean OFFENSE or wealth accumulation, while Os mean DEFENSE, or wealth preservation.

Below is where our indicators stand as of February 5, 2021 (Courtesy Dorsey, Wright, and Associates).

On a general note: 

The Department of Labor gave us the news the US economy added 49,000 jobs in January. This was close to the 50,000 jobs anticipated by many economists. The unemployment rate fell to 6.3%, which is the lowest rate since last February. Payroll numbers for November and December underwent downward revisions. The President used this report to push for his stimulus plan, and Treasury Secretary Yellen said that passage will bring full employment by summer.

The Institute for Supply Management announced its January manufacturer’s gauge came in at 58.7, down from 60.5 in December. This still is well above the 50.0 mark that delineates growth from contraction. The Services number came in at 58.3, up significantly from December’s 54.8.

The Treasury Department announced that they will double the dollar volume of inflation protected securities auctions at each week’s auction. I am unsure if this is a surprise, but it makes sense with the burgeoning debt – no matter which party controlled any branch of government. The department also called for the extension of the debt ceiling suspension beyond the current deadline of July 31st.

If you want more information or questions on this commentary, email me at philip.rongo@ibexwealth.com.