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Wall Street braces for bumpy trading in the week ahead as the GameStop short squeeze unfolds

Traders work on the floor of the New York Stock Exchange.

how to buy marijuana online.Traders

work on the floor of the New York Stock

Exchange.NYSE

Earnings news from Amazon and 

Alphabet, the important January jobs report

and Washington’s discussion of stimulus

could all be important to markets in the

week ahead, but none of it is likely to get more

attention than the short squeezes driven

by retail investors.

Stocks had a rocky week, with the S&P 500 

down 3.3% to 3,714. The S&P was down

1.1% for January, its first negative month

since October and a warning for the year,

according to the old Wall Street adage.

“We were due for some type of decline.

We’ve been straight up since October.

It’s not unusual that we’re backing off a bit,”

say Steve Massocca, managing director

at Wedbush Securities.

Trading could remain bumpy in the coming

week, as the S&P 500 struggles to hold

above 3,716 its 50-day moving average

and a key technical level.

“This is the first time we’re at the 50-day

moving average since early November,”

say Peter Boockvar, chief investment

officer at Bleakley Advisory Group. “It’s just

a level we haven’t seen in a while and it’s

an important first line in the sand of whether

the market uses this as a pivot spot to bounce

again.”how to buy marijuana online

“The buy the dip mentality doesn’t

die easy,

but if you break that [50-day], that portends

something else,” he said.

long since there aren’t that many heavily

Massocca and others see little impact on

long since there aren’t that many heavily

the broader market from the phenomena

long since there aren’t that many heavily

of retail investors piling into stocks that

long since there aren’t that many heavily

are being shorted by big investors. Fuel

long since there aren’t that many heavily

by no fee trading, retail investors create

long since there aren’t that many heavily

a flurry of trading in GameStop and other

long since there aren’t that many heavily

heavily shorted names, like AMC Entertainment.

long since there aren’t that many heavily

 If the stocks rise, in theory, the firms that are

long since there aren’t that many heavily

short sellers will have to buy stock to cover,

long since there aren’t that many heavily

and that activity could drive the price even

higher in a so-called short squeeze.

GameStop was the poster child for that trade

this past week. GameStop shares closed 68%

higher on Friday, bringing their gain for the

week to 400%. The retailer’s shares hit a

high of $483 on Jan. 28.

long since there aren’t that many heavily

“This is somewhat isolated,” Massocca say

long since there aren’t that many heavily

of trading in GameStop and other shorts.

long since there aren’t that many heavily

He said it may not be a phenomena for that

long since there aren’t that many heavily

short stocks. “I think they may be hunting

new names.”

The short squeeze story has garnered broad

interest, in the general news media and

from Washington.

Lawmakers from both parties are eager to

look into the fact that Robinhood and other

online brokers restricted trading in the hottest

short names when trading was frenzie.

Robinhood said it was responding to SEC rules

on net capital requirements and clearinghouse

deposits that brokers have to comply with.

“This was the busiest week for earnings report

with 82% of the companies reported better than

expect earnings. It’s a really good quarter, but

obviously overshadowed by the short squeeze

news,” said Leo Grohowski, chief investment

officer at BNY Mellon Wealth Management.

He said some of the biggest tech names have been lagging, like Apple and Microsoft.WATCH NOWVIDEO01:25The Week Ahead: January jobs report ahead

“The combination of demanding valuations

and short squeeze news has overshadowed a really good performance of corporate earnings so far,” Grohowski said. “We’re constructive on the market. Fundamentals do look encouraging to us.”

Strategists have expected a pullback in the first part of the year, and many say it would become a buying opportunity. Hedge funds did sell long positions in the past week, but firms like Morgan Stanley and Barclays say the de-leveraging is not likely to have a big impact on stocks.

But for investors who end up buying in at the end of the short squeezes, they could feel some pain.

“I do think this isn’t going to end well,” said Grohowski. “These kind of one way trades they don’t end well particularly for those that come later to the party.”

“I think this will be one of those

,” he said. “GameStop is not worth what it is trading for today. I do believe at the end of the day the value of a company is important and it’s going to be driven by fundamentals. These dislocations and distortions of value, they will correct and many will be hurt by that.”

But Grohowski said it’s encouraging that the surge in retail activity was driven by younger investors.

“We’ve wanted for some time for this younger generation to be more interested in the financial markets and equity investing,” he said. “I know a lot of experienced market participants were not anticipating it being this way. It’s not just a one time kind of distortion.

“I think this is thought-provoking

in terms of a way a younger generation might be looking at investing, by their rules, not the rules of the traditional market participants,” Grohowski added.

He expects the January employment report to get some attention Friday, and it should be weaker with just 50,000 to 60,000 jobs added.

He said the markets will also monitor the progress of stimulus discussions in Washington, as valuations have risen on expectations of a package coming soon. President Joe Biden has proposed $1.9 trillion in spending, but Republicans are not in agreement.

Week ahead calendar

Monday

Earnings: Cirrus Logic, Rambus, ON Semiconductor, Vertex Pharmaceuticals, Otis Worldwide, Thermo Fisher, Nintendo, NXP Semiconductor, Warner Music, Cabot

9:45 a.m. Manufacturing PMI

10:00 a.m. ISM manufacturing

10:0 a.m. Construction spending

2:00 p.m. Senior loan officer survey

2:00 p.m. Atlanta Fed President Raphael Bostic and Boston Fed President Eric Rosengren

Tuesday

EarningsAlphabetAmazon, Exxon Mobil, Pfizer, UPS, BP, Amgen, Electronic Arts, FireEye, Chipotle, Viavi Solutions, PerkinElmer, ConocoPhillips, Sirius XM, Harley-Davidson, Alibaba, McKesson, Eaton, Marathon Petroleum

Vehicle sales

10:00 a.m. Housing vacancies

1:00 p.m. New York Fed President John Williams

2:00 p.m. Cleveland Fed President Loretta Mester

Wednesday

EarningsQualcomm, Boston Scientific, GlaxoSmithKline, Abbvie, Biogen, Humana, Apollo Global Management, Allstate, eBay, PayPal, Check Point Software, Aflac, MetLife, Grubhub, KLA Corp

8:15 a.m. ADP employment

9:45 a.m. Services PMI

10:00 a.m. ISM Services

1:00 p.m. St. Louis Fed President James Bullard

2:00 p.m. Philadelphia Fed President Patrick Harker

5:00 p.m. Cleveland Fed’s Mester

5:00 p.m. Chicago Fed President Charles Evans

Thursday

Earnings: Merck, Bristol-Myers SquibbFord, Hershey, Cigna, Clorox, Yum Brands, Intercontinental Exchange, Activision Blizzard, Gilead Sciences, Snap, Pinterest, Hartford Financial, Prudential Financial

8:30 a.m. Initial claims

8:30 a.m. Productivity and costs

10:00 a.m. Factory orders

Friday

Earnings: Cardinal Health, Sanofi, Estee Lauder, Regeneron, Illinois Toolworks, Aon, CBOE Global Markets, Lazard, Biomet

8:30 a.m. Nonfarm payrolls

8:30 a.m. Employment report

8:30 a.m. International trade

3:00 p.m. Consumer credit

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