We are almost half way into December and so far stocks are dishing out anything but good cheer. For an economy that is "on the mend" this market seems to be quite bearish, currently. While it is true that the second half of December tends to be more seasonally positive than the first half, time is running out for the market to stage an end-of-year rally.
Up until Friday's significant sell-off, the major averages were seen as simply pulling back, which would set-up that seasonal rally, but Friday's action did some serious technical damage and it is now possible that the market revisits its October lows, which is still a good ways lower.
There is a saying that has significant relevance and it goes "as January goes, so goes the year". Well, the S&P 500 was down about 3% in January so by itself that does not bode well for this market.
But there are many concerns swirling around that are making it darn difficult to have confidence on where this bull market actually stands.
The European Central Bank is moving in the opposite direction of the Fed as they continue to inject QE into 2017, while our Fed appears on the cusp of raising interest rates for the first time in years; albeit in very small increments.
But there are other concerns. Friday’s decline started in reaction to news from China, where the People's Bank of China dipped the yuan to a four-year low against the dollar. This generated concerns that China's deflation might spread to other economies.
The continued slaughter in the energy sector isn’t helping either. It does not project growth in the global economy.
In the Junk Bond space, a report came out that said Third Avenue Management is liquidating its high-yield Focused Credit Fund and barring investor withdrawals while doing so. The benchmark ETF (HYG) fell to its lowest close since July 2013 on the news.
You can see that HYG decisively broke through its 200 dma on Friday and it was on very high volume. Momentum is still accelerating to the downside, while strength is oversold. It is a bearish chart.
Maybe a rate hike is what this market needs to begin to find its feet. We'll know by the end of next week.
Up until Friday's significant sell-off, the major averages were seen as simply pulling back, which would set-up that seasonal rally, but Friday's action did some serious technical damage and it is now possible that the market revisits its October lows, which is still a good ways lower.
There is a saying that has significant relevance and it goes "as January goes, so goes the year". Well, the S&P 500 was down about 3% in January so by itself that does not bode well for this market.
But there are many concerns swirling around that are making it darn difficult to have confidence on where this bull market actually stands.
The European Central Bank is moving in the opposite direction of the Fed as they continue to inject QE into 2017, while our Fed appears on the cusp of raising interest rates for the first time in years; albeit in very small increments.
But there are other concerns. Friday’s decline started in reaction to news from China, where the People's Bank of China dipped the yuan to a four-year low against the dollar. This generated concerns that China's deflation might spread to other economies.
The continued slaughter in the energy sector isn’t helping either. It does not project growth in the global economy.
In the Junk Bond space, a report came out that said Third Avenue Management is liquidating its high-yield Focused Credit Fund and barring investor withdrawals while doing so. The benchmark ETF (HYG) fell to its lowest close since July 2013 on the news.
You can see that HYG decisively broke through its 200 dma on Friday and it was on very high volume. Momentum is still accelerating to the downside, while strength is oversold. It is a bearish chart.
Maybe a rate hike is what this market needs to begin to find its feet. We'll know by the end of next week.
