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:
- Federal Reserve’s Interest Rate Hike
- Continuation of Risk-On/Risk-Off
- Chinese Economy Slowing / Market Turmoil
LONG-TERM (LT) DRIVERS:
- Economic Data
- Corporate Earnings
- Currency Wars
- Global Debt Levels
- 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).
- 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).
Armstrong, Martin. (2015). Volkswagen Scandal May Mark the German Economic Decline into 2015.75. Armstrong Economics: http://www.armstrongeconomics.com/armstrong_economics_blog
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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
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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
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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: