Monday, January 11, 2016

Week In Review (1/4 - 1/8)

Jeff Saut's January 4th pre-market note included the following:

"This morning, however, more “exogenous events” are in the air as China let its currency (the renminbi) free fall (see chart on previous page), fostering more “selling” in the equity markets across the world, leaving our preopening S&P 500 futures off a large 46 points and the Chinese markets lower by 7.3% even after a trading halt. The action brings about thoughts of “so goes the first week of the new year, so goes the month and so goes the year.” Not only that, it has also triggered a negative signal from the “December Low” indicator, but more on that tomorrow. For whatever reason, our stock market, at least at this point, looks like it is involved in a “selling stampede.” Such stampedes tend to last 17–25 sessions with only one to three session pauses/rally attempts before they exhaust themselves, and we are only five sessions potentially into this one. This is why, in our year-end letter, we said the key for investors’ success in 2016 is to manage the risk and avoid the big loss."

Jeff's term "selling stampede" certainly seems accurate as stocks were crushed this week. The S&P 500 had it's worst opening week ever, down 6% and the Russell 2000 saw relentless selling.

As the market approaches oversold levels here, we may be due for a near-term bounce. Longer-term however things look far more ominous as many (most?) markets look to be breaking down.

Here are a few articles from the week that pretty much sum up the current shape of the market:

The odds of another crash...

The average stock is already in a bear market

A case for more downside...

Enjoy your weekend. Go Redskins!

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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