Saturday, July 11, 2015

Week in Review 7/6 - 7/10

Wow!  What a week of volatility and stock market action.  It certainly was a contrast to the sometimes boring, range bound moves we'd seen thus far in 2015.  The tweet from Jason Goepfert on Friday helps to illustrate what similar conditions have meant during this bull market.

You don't have to look any further than your favorite financial news network/website for the "headline" reasons (Greece, China, etc) as to why the market feels shaky here.  However we prefer to look at price to best understand where things stand.  On a daily chart of the S&P 500 the market continues to reside in a 6-month sideways channel.  The current sell-off has taken the index to the low end of this range once again.  The 200-day moving average has also come into play for the first time since last October.

If we back out to a longer term timeframe and look at the monthly chart of the S&P, we see that we are bumping up right against the 12-month moving average.  This level also coincides with the uptrend line from the 2009 lows.  We'll be watching this chart closely as the month goes on to see if these important levels are respected.

We saw an expansion of breadth to the downside this week as the number of new 52-week highs vs lows hit the lowest level of the year.  However, the S&P did not follow suit and put in new 2015 lows.  As you can see from the sell-off last October there is plenty room to the downside for stocks making new lows.  If this happens, the S&P could get dragged lower.

The latest sentiment data continues to show that investors are terrified of this market.  Another statistic from Sentiment Trader's Jason Goepfert:

According to the CNN Fear & Greed Index, investors have become panicky. Fewer than 1% of all days since 1998 have shown the level of pessimism suggested by the index, and stock returns in the months ahead, have been significantly positive (see chart below).

It was also a week chock full of good reads:

Josh Brown on sector and individual stock performance dispersion

Charlie Bilello on the S&P's test of its 200-day MA

An update on asset class returns

Putting this most recent pullback into context

Are we finally getting a 10% correction?

Ryan Detrick with lots of commentary on the 200-day MA

A refresher on the impact of volatility on your portfolio

How might Greece impact the Fed's decision making?

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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