Monday was another one of those odd market days, as the rotation out of growth and into value continued in full force. Stocks, sectors, and industries that were left for dead for most of 2020 due to the pandemic have come roaring back, while former leaders that we thought were technically over-owned and over-loved continue to sell off.

Insider sentiment continues to suggest a reasonable degree of caution. As we have said for several weeks now, this caution does not mean that a major correction is bound to occur. But it does suggest that there are few near-term catalysts that insiders see as likely to drive stock prices (around all-time highs already) quickly higher.

We have highlighted (repeatedly) the current strong market breadth, even suggesting it might be too strong and in need of a reset. We've also talked about extremely overheated market sentiment, also in need of a nice reset as we see it.

The stock market performed well last week, touching fresh highs with no clear-cut catalysts aside from relatively strong earnings. Tech stocks outperformed blue chips, though small-cap stocks outperformed both. During Friday's session, the Dow Jones Industrial Average increased 28 points, or 0.09%. The S&P 500 was up 0.47%, and the Nasdaq Composite increased 0.50%. For the week, the DJIA climbed 310 points, or 1.00%, the S&P 500 climbed 1.23%, and the Nasdaq Composite led the way, climbing 1.73%. Year-to-date, the DJIA is up 2.78%, the S&P 500 is up 4.76%, and the Nasdaq Composite is up 9.37%.

Stocks were largely flat on Wednesday morning following earnings reports from Alphabet and Amazon and new employment data. Payroll provider ADP said that U.S. private employers added 174,000 jobs in January, well above the Reuters consensus forecast of 49,000 and up from a loss of 78,000 in December. The Dow fell 0.2%, the S&P was flat, and the Nasdaq rose 0.1%. Crude oil traded near $56 per barrel, while gold rose $3 to $1836 per ounce.

A few weeks ago, we talked about the potential for a major U.S. Dollar Index (USD) bottom based on a number of technical factors. The greenback was close to major long-term chart support, the COT data (absolute and adjusted for open interest) was very favorable for the dollar, and the COT data for the euro (58% of the USD) was very unfavorable. Sentiment toward the dollar was also very poor while sentiment toward the euro was very bullish. Since then, the USD has bounced 2.3% -- so we have a start.

January ended with a fizzle, as stocks recorded their worst month since October and the S&P 500 registered a loss for the month. In a month that featured the incursion at the Capitol Building and a heavily policed inauguration, few predicted that the key market driver would be a retail chain that a few hedge funds (to their misfortune) perceived to be on its last legs.

We have studied the monthly, quarterly and annual returns in the stock market since 1980. February is not one of the best months. On average, stocks rise only 0.1% in the month. Only the months of August and September have generated weaker average returns. There have been some strong Februarys, including 7% gains in 1986, 1991 and 1998, as well as a 5.5% surge in 2015. But there have been some bombs as well: a 6% drop in 1982, a 9% plunge in 2001 during the "dot-com" bust, and an 11% collapse near the bottom of the Great Recession and bear market in 2009. February 2020 was also a clunker, as the coronavirus began to spread around the world and the economy tumbled into a recession. This time around, investors are still concerned about COVID-19 and the economy, not to mention stock-market valuations and irregular trading activity. Below the headlines, the fundamentals for stocks remain strong: the domestic economy is again growing, interest rates are low and corporate earnings are poised to rebound. We think selloffs could represent buying opportunities in advance of recovering stocks later in the year.

Stocks rose on Thursday, but gave up some of their midday gains, as investors weighed results from a range of major companies along with new employment and GDP data. The Labor Department reported that both first-time and continuing unemployment claims fell from the prior week, and came in below consensus forecasts. Meanwhile, the Commerce Department said that the U.S. economy expanded at a 4.0% rate in 4Q, slightly below the consensus forecast of 4.2%. For the full year, the economy contracted at a 3.5% annualized rate - the first full-year decline since 2009. On the earnings front, McDonald's posted disappointing 4Q sales and earnings, with international comp sales down 7.4%, reflecting the impact of coronavirus lockdowns in Europe. Tesla shares fell 3% after the automaker posted mixed fourth-quarter results and failed to provide specific sales guidance for 2021. The Dow rose 0.99%, the S&P 0.98%, and the Nasdaq 0.50%. Crude oil fell to $52 per barrel, while gold fell $4 to $1845 per ounce.

New Year Brings More of the Same for Economy, New Sector Leadership

Capital One is a diversified financial-services holding company, primarily involved in credit card lending, auto lending, and commercial lending.

Stocks were largely flat on Tuesday morning as investors weighed earnings reports from a range of major companies. Johnson & Johnson shares rose 3% after the company posted better-than-expected 4Q earnings and said that it would provide an update on its COVID-19 vaccine candidate 'soon.' GE shares rose 5%, despite slightly lower-than-expected 4Q EPS, as the company posted strong industrial free cash flow and issued positive guidance for 2021. The Dow rose 0.1%, the S&P was flat, and the Nasdaq rose 0.1%. Crude oil traded near $53 per barrel, while gold fell $2 to $1853 per ounce.

Stocks fell on Monday morning, giving up early gains amid concerns about congressional opposition to the Biden administration's $1.9 trillion stimulus plan and the impact of new coronavirus variants. Moderna shares rose more than 7% after the company said that it was developing a new version of its COVID-19 vaccine to better target a rapidly spreading South African variant of the disease. Meanwhile, Merck said that it would halt the development of its COVID vaccines after disappointing clinical trial data. The Dow fell 1.1%, the S&P 0.7%, and the Nasdaq 0.2%. Crude oil traded near $52 per barrel, while gold fell $4 to $1852 per ounce.