Why Nobody Needs To Worry About Stocks Right Now

On Tuesday, the S&P 500 broke a five-day losing streak, gaining just under five points as the widely-watched index bounced right off its 50-day moving average.

Not so fortunate was the NASDAQ, which ended in the red for the fifth time in the past six sessions. It finished the day resting right on its 50-day moving average.

The distinct impression is that there's either something magical or important about those 50-day moving averages, an astute observation as most trades these days are of the programmatic, algorithm-blessed, computer-driven, non-human kind, keyed to respond to headlines and trend lines, like the moving averages.

When these trend lines are violated or even touched down upon, the algos are instructed to buy, hitting just about anything vulnerable. Just in case there's insufficient thrust to move the index or group of stocks off the point, there are always humans, such as the PPT, to pick up the baton of endless stock wins and boost prices higher.

Obviously, such chicanery has been going on for some time now and it's been especially poignant since stocks got slammed at the outset of the coronavirus last year.

We've recently celebrated the one-year anniversary of the beginning of the 2020 crash. On February 20, 2020, the S&P dropped a massive 113 points. It kept falling, almost daily, until reaching the bottom at 2,237.40 on March 23rd.

Since then, the S&P has put on quite the show, closing on Friday, February 12 of this year at 3,934.83, a near doubling off the lows and an overall gain of 1697 points.

The NASDAQ was a little less spectacular at the start of its decline, but it made up for any lack of bedazzlement on the upside. On February 20, 2020, the NAZ shed 67 points to end the day at 9,750.97. But, the following session, it took a 74-point hit, closing out the week at 9,576.59. The following Monday, February 24, the index gulped down a 355-point loss, finishing at 9,221.28.

Losses continued to pile up on the NASDAQ until finally hitting bottom on March 23rd when it closed at 6,860.67.

Over the ensuing 11 months, the NASDAQ did actually double in price, topping out at 14,095.47 on February 12, less than two weeks ago.

Now, before bemoaning the recent declines, bear in mind that investors have been making hay just holding onto stocks for the past year. The NASDAQ ended Tuesday's session at 13,465.20, a 630-point decline from the all-time high. Boo-hoo. The mighty NASDAQ has shed almost five percent. The decline on the S&P has been even less enthralling, down an entire 53 points from less than two weeks ago. The end at 3,881.37 Tuesday marks a loss of less than two percent.

It would be justifiable to suggest that investors are far from worried. After all, they have their man, Jerome Powell, at the Fed, and their lady, former Fed Chair, Janet Yellen, at Treasury, ready to jawbone to the extreme should any doubt enter the minds of shaky-handed newbies in the investment community.

Powell appeared, virtually, before the Senate Banking Committee on Tuesday, telling Senators, “The economy is a long way from our employment and inflation goals,” while reaffirming the Fed's commitment to easy money policies for the remainder of 2021 and likely beyond. According to the Chairman, the economic recovery is only just beginning.

As for Yellen over at Treasury, she doesn't have to say much, as everybody knows she'd like the $1.9 trillion Biden/congress COVID relief bill to be even larger. From her perspective, the $1400 per individual in the bill would be better if it had an extra zero attached to its end. For all her love of easy money, assigning a dovish posture to Janet Yellen would be a mistake. She's more an accommodative hawk, carrying a bazooka loaded with canisters of $100 bills, ready to fire off in any direction.

With these two backing stocks over anything else, Wall Street is probably more juiced for a "buy the dip" moment than worried about further declines.

Until somebody issues some dire, unmistakable warning or rings a bell for the top, stocks should continue an easy glide path into the stratosphere.

At the Close, Tuesday, February 23, 2021:
Dow: 31,537.35, +15.66 (+0.05%)
NASDAQ: 13,465.20, -67.85 (-0.50%)
S&P 500: 3,881.37, +4.87 (+0.13%)
NYSE: 15,359.13, +18.66 (+0.12%)