2016 OFF TO A BAD START / DAVE´S DAILY

2016 Off To A Bad Start

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Evidently there was plenty of demand to sell stocks as 2016 began.

2015 didn’t end well and I’ve been telling subscribers for the last quarter that markets looked very toppy.

The Fed didn’t help by raising interest rates in what is now perceived as poor timing. In other words, many believed they waited much too long, perhaps 3-4 years, to do so given economic data overall in 2015 was weakening.

Monday there was a trifecta of bad economic data. PMI Manufacturing Index fell to 51.2 vs prior 52.8; ISM Manufacturing Index fell to an already weak 48.2 vs 49.2 expected & prior 48.6; and, Construction Spending fell to -0.4% vs 0.7% expected & prior 0.3%.

None of this data, and that previously was as “solid” as the Fed had asserted.

Their credibility is shot. Naturally, it doesn’t help that the U.S. government has revised lower Construction Spending data going back nearly 10 years.

 

In addition, New Home sales data was also revised lower as well:

I had told subscribers throughout the fourth quarter the “stick save” rallies from the third quarter still left equities in a topping manner as 12 Month Moving average had been violated through most of the quarter.

That allowed us to close our Growth & Income Model Portfolio completely with only modest YTD losses of just over 1%. But, our Aggressive Growth Model Portfolio closed the year up 103.00% given trading profits in the third quarter. Then the portfolio went to cash for most of the fourth quarter. (So, allow us the victory lap for now.)

Markets were seriously weak from the opening bell. Globally, especially in China, stocks were seriously red as well with gains only found in Treasury bonds, Gold and Gold Stocks. It doesn’t help that the Middle East is in such a violent mess.

Market sectors moving higher included: Bonds (TLT), Gold (GLD), Gold Stocks (GDX), Energy (XOP), Energy MLPs (AMJ) and Volatility (VIX).

Market sectors moving lower included: Everything else.

Below is the Finviz heat map for Monday’s market.


The top ETF daily market movers by percentage change in volume whether rising or falling is available daily.
Volume was very heavy and breadth per the WSJ was negative.
            

 
 
 

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Charts of the Day

Major U.S. Markets (7)
International & Emerging Market ETFs (8)
$NYMO (1)
$NYSI (1)
$VIX (1)

• SPY 5 MINUTE

  
  
  
  
  

• SPX DAILY

  
  
  
  

• SPX WEEKLY

  
  
  
  

• INDU DAILY

  
  
  
  

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• RUT WEEKLY

  
  
  
  

• NDX WEEKLY

  
  
  
  

• FXI WEEKLY

  
  
  
  

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• EWY WEEKLY

  
  
  
  

• EPI WEEKLY

  
  
  
  

• AAXJ WEEKLY

  
  
  
  

• NYMO DAILY

  
  
  The NYMO is a market breadth indicator that is based on the difference between the number of advancing and declining issues on the NYSE. When readings are +60/-60 markets are extended short-term.
  
  

• NYSI DAILY

  
  
  The McClellan Summation Index is a long-term version of the McClellan Oscillator. It is a market breadth indicator, and interpretation is similar to that of the McClellan Oscillator, except that it is more suited to major trends. I believe readings of +1000/-1000 reveal markets as much extended.
  
  
  
  

• VIX WEEKLY

  
  
  The VIX is a widely used measure of market risk and is often referred to as the "investor fear gauge". Our own interpretation has changed due to a variety of new factors including HFTs, new VIX linked ETPs and a multitude of new products to leverage trading and change or obscure prior VIX relevance.
  
  

I don’t think markets are just going to crash now. Based on the closing market action, bulls (perhaps based at 33 Liberty) showed up late in the day.

You can see their hand at work just after 3:30 PM to ramp stocks off serious support.

If we’re going down it might look like a controlled dive.
But, then I’ve learned over the past 40 years to obey an old economist’s advice: “If you must forecast, forecast often.”

Let’s see what happens.