Saturday, May 30, 2015

Week in Review (5/26 - 5/29)

The market ended the week and month with a bang.  Three out of four days in the holiday shortened week had intraday ranges of greater than 15 points in the S&P 500 as volatility shot back after hitting 2015 lows last week.  The VIX finished the week up 15% while the S&P was down .90%.  The S&P once again finds itself engulfed in a range bound market.  Attempts to sustain last week's new highs and a range breakout were thwarted as price once again was faded back into the chop zone.

For the week, all the major index's finished in the red.

Looking at sector relative strength, semi's (SMH) broke out to new highs on more M&A action with AVGO taking out BRCM and what was already a leading industry continued it pattern of success.  An area of weakness that almost every talking head has discussed was the continued move lower in transports (IYT).  While this divergence doesn't worry us too much it's something we do, and will continue to, watch.  We would prefer to see the opposite with transports confirming the industrials but negative divergences  can just as easily be resolved to the upside.

It was a different story when taking a full month view.  Domestic indexes finished in the black for May while weakness found its way into international markets.  From a sector standpoint, financials and healthcare exerted leadership while energy continued to be a laggard.   

For some real volatility all we have to do is look across the globe and see the action in the Shanghai index.  This, by far, has been the best performing market for the last year up a blistering 133% while also up 43% year to date.  But moves like this don't come without some wild volatility and drawdowns.  This week saw one nasty sell off from the top as it closed down 6.5% on Wednesday alone.  Who knows if that was the ultimate top or not but this is a great example of upside and downside volatility.

Here's what we were reading this week:

Raymond James Weekly Investment Strategy Update

Michael Santoli on stocks paying attention to what the bond market is saying

Investors are heavily levered

Larry Kudlow on Yellen's approach

Josh Brown notes that it's been 3 and a half years since the last 10% correction

Ryan Worch is the Managing Director of Worch Capital LLC. Worch Capital LLC is the general partner of a long/short equity strategy that operates with a directional bias and while emphasizing capital preservation at all times.

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