Worst First Ten

Today’s close locked in the worst 10 day start to a calendar year in market history.  The headlines suggest the weakness is about the price of oil plunging and investor concern over slowing economic growth in the U.S.  There will be all manner of both wringing of hands as well as suggestions that it’s a great buying opportunity “right here.”

What should you do?  Stay with your process.

The Numbers (based on Friday)

DJIA -391 (-2.4%)

DJIA As of 15 January 2016


S&P 500 -42 (-2.1%)

SP 500 As of Close 15 January 2016


Nasdaq Composite -126 (-2.7%) [QQQ -$3.23 (-3.1%)]

Nasdaq Composite As of 15 January 2016


WTI Crude  -$1.78 (-5%) USO Chart

USO W As of 15 January 2016


Technically as noted above, the SPY broke below its 24 August 2015 Low on Friday,  which many people deem a major sell signal.

The DJIA was down more than 500 points intraday.

Oil traded below $29 briefly and settled below $30.  North African nations show no signs of taking their foot off the oil pumping pedal… indeed they can’t.  Most of them spent no time diversifying their national economies when oil was in the stratosphere and thus, now that oil has plunged, they have no alternative to pumping more as the price falls just to keep their national coffers filled.

Personally, I only see the SPY break as a place to change your bias to Sell (if it wasn’t already there.  Your job now would be to wait for a retracement of sorts and a sell setup on a lower timeframe… classic trading 101.

Friday’s headlines didn’t do anything to help what was already a nervous market…

China tanked after official data showed that new bank loans were lower than expected with lenders retrenching amid worries of slowing growth and bad debt.  China’s central bank pumped $15 billion of funds into the market, but that didn’t really help.

It was options expiration… because of how the market was structured, options dealers had to sell more futures to hedge positions as stocks fell.

Intel (INTC) – reported soft numbers/guidance late Thursday and gave up 9%.

INTC W As of Close 15 Jan 2016


Walmart (WMT) –  closing 269 (mostly express) stores and laying off thousands of employees.

WMT W As of 15 Jan 2016 Cl


Economic Data:

  • Empire State Factory Index showed a sharp decline in January to the lowest level since January
  • Retail Sales declined by .1% in DECEMBER
  • Industrial Production showed activity declined for the 3rd straight month
  • Business Inventories showed contraction, but not enough to sufficiently offset the decline in sales.
  • Consumer Sentiment (rose to 93.3 in January from prelim reading of 92.6)  was the lone bright spot in Friday’s economic data… Don’t put much stock in this though… it’s a survey of 500 US households per month and by definition lags since the average consumer pays little attention to economic conditions unless and until it’s extreme.

Upshot… As always, I say again… stay with your validated process.  Do not deviate.  The results will take care of themselves.

Until next time…


The Trader