SQUAWK BOX WEEKLY UPDATE – 9/28/15

Week 3 – Monday September 28, 2015

Markets Performance / Current Trading Range

  • Today’s Monday trading was another very volatile day with the S&P 500 dropping 50 points, or -2.6%, falling back down to 1,882.
  • Last week, the S&P 500 dropped for the second consecutive week, falling -1.4%, falling from 1,958 on Friday, 9/18 to a close of 1,931 on Friday, 9/25.
  • Volatility, confusion, and downward bias appear to be continuing this week, along with a real lack of buyers across sectors.
    • Stocks trading lower 7 out of the last 8 days.
    • S&P currently sitting at the 1,880 handle, just above major technical support levels of 1,875 – any sustained close below this key threshold this week will likely create more downward pressure.

 Recent Trading History

  • Continuing on the technical front, it has become increasingly clear that the former support levels for the S&P 500 (1,980-2,000) from late 2014/early 2015, are now acting as strong resistance for the market, as the benchmark index has failed on several occasions since late August to push above this key threshold.
  • The S&P 500 was range-bound (nearly 100 point range) for roughly three months (May-July), trading sideways between 2,040 and near record territory of 2,120, before falling convincingly below the 200-day moving average in late August.
  • Volatility has increased since late August, as the S&P 500 dropped as much as -12% to a recent low of 1,867 (level last seen in October of 2014).
  • Nevertheless, volatility has returned these past few weeks, with 500-1,000 intraday swings once again occurring on a more regular basis.

  Market Drivers (*Level of Importance/Weight in Descending Order/Bold Discussed in Audio Podcast)

 SHORT-TERM (ST) DRIVERS: 

  1. Federal Reserve’s Interest Rate Hike
  2. Continuation of Risk-On/Risk-Off
  3. Chinese Economy Slowing / Market Turmoil

 LONG-TERM (LT) DRIVERS:

  1. Economic Data
  2. Corporate Earnings
  3. Currency Wars
  4. Global Debt Levels
  5. Geopolitics and Terrorism

 Major Events on the Horizon

  • On Friday (10/2), both the Non-Farm Payrolls and the Unemployment Rate figures are released
  • Fed Chairwoman Janet Yellen speaks again on Wednesday (10/1) afternoon.
  • FOMC Decision on Interest Rates
    • October 27-28
    • December 16 (with Press Conference)
  • Earnings season beginning in full force on October 12
  • Similar to 2012, the government could shut down if Congress does not agree on a budget for the year at midnight on Wednesday (9/30).

 Glossary: 

  • Support / Resistance – Support and resistance is a concept in technical analysis that the movement of the price of a security will tend to stop and reverse at certain predetermined price levels. These levels are denoted by multiple touches of price without a breakthrough of the level (Wikipedia, 2015).
  • Currency War – Currency war, also known as competitive devaluation, is a condition in international affairs where countries compete against each other to achieve a relatively low exchange rate for their own currency. As the price to buy a country’s currency falls so too does the price of exports (Wikipedia, 2015).

 

References:

Armstrong, Martin. (2015). Volkswagen Scandal May Mark the German Economic Decline into 2015.75. Armstrong Economics: http://www.armstrongeconomics.com/armstrong_economics_blog

Cashin, Art. (2015). Cashin says: Weak revenues a factor across market. CNBC: http://video.cnbc.com/gallery/?video=3000424046

Durden, Tyler. (2015). When Two Uber-Bears Sit Down: Albert Edwards And Bob Janjuah Expect The Fed To Cut To -5%. Zero Hedge: http://www.zerohedge.com/news/2015-09-24/when-two-uber-bears-sit-down-albert-edwards-and-bob-janjuah-expect-fed-cut-5

Durden, Tyler. (2015). Recession Imminent – Kansas Becomes 6th Regional Fed Survey Flashing Red. Zero Hedge: http://www.zerohedge.com/news/2015-09-24/recession-imminent-kansas-becomes-6th-regional-fed-survey-flashing-red

Guilfoyle, S.; Moraif, K. (2015). What investors want from Yellen. Fox Business: http://video.foxbusiness.com/v/4506594097001/what-investors-want-from-yellen/?#sp=show-clips

McCullough, Keith. (2015). Listen to Guys Like CNBC’s Steve Liesman At Your Own Peril. HedgeEye:  https://www.youtube.com/watch?v=nlC9X6xIZOI

Rickards, Jim. (2015). The Gold Chronicles: September 15, 2015 Interview with Jim Rickards. Physical Gold Fund:  http://www.physicalgoldfund.com/the-gold-chronicles-september-15-2015-interview-with-jim-rickards/

Santelli, Rick. (2015). Santelli Exchange: If the Fed raised rates. CNBC: http://video.cnbc.com/gallery/?video=3000424466

Schiff, Peter. (2015). Investors have been fooled by the Fed: Schiff. CNBC: http://video.cnbc.com/gallery/?video=3000424431

Shedlock, Mike. (2015). How Long Will Janet Yellen Last as Fed Chair? Fed Declines to Comment on Her Health, I Will. MISH’s Global Trend Analysis: http://globaleconomicanalysis.blogspot.com/2015/09/how-long-will-yellen-last-as-fed-chair.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+MishsGlobalEconomicTrendAnalysis+%28Mish%27s+Global+Economic+Trend+Analysis%29

Verhage, Julie. (2015). Goldman: Get Ready for Another Bumpy Ride This Earnings Season. Bloomberg:

http://www.bloomberg.com/news/articles/2015-09-28/goldman-get-ready-for-another-bumpy-ride-this-earnings-season

Whipp, Lindsay. (2015). Caterpillar sends warning on global demand. Yahoo!: http://finance.yahoo.com/news/caterpillar-sends-warning-global-demand-164022388.html?l=1

Yellen Stumbles During Amherst Speech. The Wall Street Journal. WSJ Video:

http://www.wsj.com/video/yellen-stumbles-during-amherst-speech/3E9323E7-EFEF-48DD-B429-2C1FC93C7394.html

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