The Dow rallied 175 points on light trading volume to close at 25,239. Today’s action was encouraging because it represented an upside reversal which is when stocks open down but finish up.
With roughly half of the S&P 500 companies having reported earnings, the results are good. The collective earnings per share are up about 18% compared to this time last year and ahead of the 15.5% average estimate put forth by the gurus. 71% of companies have reported numbers above estimates which is better than the long-term average of 64%.
As stocks posted their best January performance in 30 years it appears that many mom and pop investors unfortunately are missing the boat. TD Ameritrade published its “Investor Movement Index” (IMI) which shows that Joe & Barbie Sixpack have been selling stocks over the past several weeks and going to bonds and cash. The IMI has fallen to its lowest level since July of 2012 indicating that small investors are selling in January while everyone else appears to be buying. 2018 was one of the worst years for the $3 trillion Hedge fund industry and institutional investors bolted from this space in December helping to send markets sharply lower in the waning days of the year. This selloff sparked fears of a greater move lower which caused smaller investors to follow suit and get out. Company Insiders meanwhile saw the drop as an opportunity and increased insider purchases to a 10-year high. TD indicated that retail investors on their platform are heavy in bonds but are pecking away at Amazon and Apple while selling Faceplant and Tweeter.
This coming weekend I will be leading an intrepid band of Troop 100 lunkheads on a snow hike near Blewett Pass. The recent snowstorm should make this an interesting, challenging and fun event. I hope to teach the scouts how to build roaring camp fires and make “flaming snowballs”.