January 9, 2016
Weekly Market Outlook
By Keith Schneider
The US equity markets ended the week down -5 to -7%. depending on the index. This is not considered an auspicious beginning and in fact it’s the worst first week of the year since the before turn of the last century. Even most of the leading NASDQ 100 stocks where virtually all of 2015 gains came from (FB, AMZN, NVDA, GOOG, ATVI and NFLX) caved. Smaller cap stocks that live in the Russell 2000 once again lagged, closing down for the week about - 7%.
There are only 20 S &P 500 stocks above the 10 moving average and just 101 above their 200 day moving average. Optimists might point out these are levels where massive rallies begin or if you are the perennial bear like old pro Marc Faber, you believe this is just the beginning of a massive decline fueled by unprecedented credit expansion and a Chinese economy in a free fall with not even OZ behind the curtain.
The Chinese stock market continues to plunge despite massive government intervention. Let’s count the ways the Chinese authorities have attempted to halt the mass exodus of their equity markets:
Even though the US macroeconomic picture looks pretty good and has decent growth, the impact from the fallout of a Chinese meltdown in this global economy is unknown. Chinese banks are highly leveraged and reserves for non-performing loans are set at 2% although some believe this is 10 to 20 times less that what is should be. The longer term picture of perpetual Chinese growth fueled by US and western consumers seems improbable.
The bright side is that market is getting pretty extended to the downside and close to where bounces have occurred. Let’s go to this week’s video and look at support levels and where the bounce is likely to start. We will also take a look at the Euro and Gold, two areas of strength this week.
Every week you'll gain actionable insight with:
