Disappointment over China’s weaker than expected manufacturing data and concerns over the expiration of insider lockups and investors’ front-running them overshadowed the positive signs of expansion in manufacturing activity throughout key countries within the European Union. Of course, halted trading on China’s exchanges after its CSI 300 Index crashed 7% didn’t help morale much either.
The aversion for risk was contagious and spread throughout Europe and carried over into the U.S. equity markets. Needless to say, bonds, gold and the Japanese Yen were some of the day’s most favored havens of safety.
Geopolitical risks were another issue confronting traders and investors as Saudi Arabia severed diplomatic ties with Iran after unimpeded protesters burned its embassy upon news of the execution of a Shiite cleric.
Lastly, in case anyone has not noticed, the manufacturing data reported out of the U.S. was not encouraging. December-2015’s ISM Mfg PMI declined for a sixth consecutive month and has now contracted (readings below 50) for 2 straight months. Today’s results were @ 48.2 vs. consensus @ 49.0 and previous @ 48.6.
One day does not a market make, but the market will need time to process these concerns and adjust pricing to reflect the “perceived” risks until reality provides clarity.
No further comments…
*Trends: ST = short-term; MT = Intermediate-term; LT = long-term
Sometimes a picture speaks a thousand words, whether it is Stanley to our left or a daily chart of the SP-500 below. The weak market internals which I mentioned leading into the holiday season proved to be a valid warning. Of course, concerns over China also played a role. However, one can see that the resistance of downward trend has yet to be broken and, until it is, the risks must be respected. Bearish momentum has accelerated and while any reversal of such may provide short-term trading opportunities, I would not advise committing serious capital without stronger bullish signals. This is a trader’s market. Expect increased volatility.
To end this on a positive note, I do hereby acknowledge the successful testing of previous support levels.
Hillbent on the Market Direction…
|Daily Chart Technical Analysis|
|New 5-day highs||16||New 5-day lows||458|
|New 52-week highs||1||New 52-week lows||13|
|Bullish reversals||62||Bearish reversals||5|
|% > 20 M.A.||% > 50 M.A.||% > 100 M.A.||% > 200 M.A.|
|25% ↓||26% ↓
|↑ = positive momentum; ↓ = negative momentum; and ↔ = neutral momentum|
Volume Radar Alerts
- Vol % = volume percentage greater than average volume
- SIR = short interest ratio or days to cover
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