Overnight Chinese markets were halted as selling flooded their markets causing circuit breakers to halt trading for the day. Markets around the world reacted negatively and continued through the European market close. Volume ended higher across the board as institutions were quite active in the market today. Not all was bad as the last 30 minutes saw the NASDAQ rally over 40 points and the Dow nearly 150 points. AAPL was able to recover from its early losses helping the indexes push higher into the close. The damage has been done and this is the worse start to the year since 1932! The Dow ended up down more than 20% that year. Keep in mind our market model has been a sell on the Transports since last spring. Things are not looking good off of last week’s trading into the start of this week trading. Cash is king.
The last few trading sessions have not been kind to stocks and our FANG stocks. Although many received support today are now below the 50 day. FB, AMZN, NFLX, and GOOGL were holding up relatively well until the recent selling has now blemished their charts. AMZN was the only stock not receiving tremendous intraday support. AAPL made a bid and got back to even today closing just .09 above last Thursday’s close. Volume was above average, but the long term trend of the stock is still down. A lot more needs to occur if we are to see this stock move higher. Leading stocks look shaky now and is a warning flag January and the rest of this year could make for a VERY interesting year.
If you haven’t heard 2015 from a price standpoint ended lower for the S&P 500. The index closed the year with a loss of 73bps. On a total return basis, the index ended higher by 137bps. Oh those dividends! The winner on the year was the NASDAQ 100 closing on a total return basis of 9.75%. Not too bad. Unfortunately, small cap stocks ended lower by more than 5% as institutions were too busy rushing into big cap NASDAQ listed stocks. As far as we can see the appetite for risk is nearly non-existent.
A fitting way to end 2015 is with AAII Neutral completely dominating the survey. AAII Bulls ended the year at 25% and the Bears ending the year at 23%. 52% of all AAII respondents thought the market would be flat in 6 months. Not higher or lower, but flat! NAAIM exposure index was less than 50% long showing active managers not willing to risk a large exposure to equities. While we may be looking at a fearful market the VIX ended near session lows today at 20.70.
Writing is on the wall here and it says cash is king for now. Waiting for the right opportunity will not be an easy thing to do for those who trade on an end-of-day basis. There are opportunities to day trade as January is historically a good month to see big jumps in low priced stocks. As long as you are able to control risk through position sizing and cutting losses fast it can help your bottom line. Stick with Big Wave Trading and we’ll ride the market’s wave to success!
