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Sunday, 7 February 2016

why did the stock market drop today



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why did the stock market drop today ?

why did the stock market drop today
why did the stock market drop today

so, why did the stock market drop today ? Infact, why is the stock market doing horrible the last few weeks. Since the beginning of 2016 the stock market is dropping like a rock, and it has lots of investors nervous out there. 

Friday's jobs report had the whole market skidding down. It was a horrible day as analysts say they would not be surprised to see stocks take aim at January's lows in the week ahead as investors await two days of testimony from Fed Chair Janet Yellen. If that happens, more investors will be losing some of their hard earned money.

The two days of testimony of Yellen on the economy before congressional committees Wednesday and Thursday is the highlight of what promises to be another volatile week in markets. It set to make market turn on a dime and the volatility at records heights. One catalyst that has been temporarily removed is China, where markets are closed while Lunar New Year begins, so little data is expected.

Yellen will be giving her speech at the end of the this week, but the markets have also priced out the possibility of a rate hike for this year, that is because the weakening economy and faltering financial conditions could give way to a recession. Its probably a little to early to go preaching in a the streets about a recession, but the weekly chart below of the S&P is a little depressing. It could basically mean more lows are on the cards!!!. Look at the chart of the S&P, the last few weeks looks nothing more than a BEARISH FLAG set up on the daily chart. Right now we busted down from the flag pattern itself.

why did the stock market drop today
why did the stock market drop today

Also in the week ahead. The JOLTs report on job openings and turnover Tuesday will be important, after the January employment report showed a big decline in hiring — just 151,000 payrolls — but a surprise pickup in wages and a decline in unemployment to 4.9 percent, due to more workers finding jobs.

The jobs report last friday could convince investors that this soft patch could turn into a bigger slowdown or recession. There is also retail sales data on Friday, a key read on the consumer. So we will have to wait and see, but so far we do not feel the selling on the market has stopped.

"There's a lot of pressure on the Fed chair. It's definitely a tricky situation for the Fed. The economy doesn't look too bad but it certainly has weakened. They finally got liftoff, and now the market is clamoring for at least a reversal — to stay on hold, if not some outright action," said Gina Martin Adams, Wells Fargo Securities institutional equities strategist.

Stocks sold off violently Friday, and the S&P 500 was off 3.1 percent for the week to 1,880, after three weeks of gains. LinkedIn's earnings disappointment sent its shares down 43 percent, and momentum names followed. Facebook was down nearly 6 percent Friday, and the IBB, iShares Nasdaq Biotechnology ETF lost 3.2 percent.

This market certainly has shifted so very defensively that it seems to me the market is trying to price in a very significant slowdown in growth. As much as the economic data has weakened it still shows expansion," said Adams.

It seems that the smarter investors have taken a more defensive tack now but investors shouldn't just dump stocks. Most investors are in a quandary on what to do. "I think the markets are thinking recession. It's a little early to get in, but it's late to get out. Why sell stocks now that have taken most of the beating they're going to take?" I think we 5 weeks of the new year, its too early to get excited about a new bear market.

One of the most important things to watch is the US Dollar. The dollar in the past week lost 2.6 percent, its worst performance since October 2011. But its losses helped stanch some of the selling in oil. Still, West Texas Intermediate crude futures were down more than 8 percent for the week, ending right above $30 per barrel.

"The technical patterns say we can't dismiss the possibility of going lower. It's a pretty weak little recovery rally, as well. It just seems people are willing to take a wait-and-see attitude rather than 'buy on dips' mentality. About 40 percent of the gains from the low has been from energy's bounce back," she said. "We haven't seen anything in earnings that generates a lot of optimism. The numbers are OK but exhibit a slowdown from where we were a few months ago. There's not a lot of reason to stick your neck out and take a risk."

Lets just say if the market breaks those January lows, the S&P 500 might want to go to test an important area right below 1,800. That level is key. Below there, and this bull market is in serious trouble, as in "HOLY MOLEY grab on to the life raft, lets get out of here!!!"

We would not be surprised that low from late January SPX 1,812 could get touched soon, and the  market, and has now lost it MOJO for now.

Even though the market is oversold there is no reason to call a bottom here. That would be stupid. ll 5 percent off the low of the year when there's even more technical damage than we had the last time stocks were at that level? Its sort of damned if you do, damned if you don't sort of levels here. So its better to wait we think. There is a saying for the last few hundred years with well known traders...that is "SO GOES JANUARY, SO GOES THE ENTIRE YEAR" Basically it means, if you have a positive january month on the stock market, the whole entire year should be bullish. But if you have a dismal and horrible january the whole year on the market will be BAD. If this was the case, we just had one of the worst januarys on records, and it would mean the whole year is going to be a nightmare for investors. Well, we shall see, but its a bit too early to just write off MR market here, so early in the year. 

If we get more selling in the weeks ahead, we could see the SPX 1,770 magnetize itself.  

We still have issues coming out of china, and the commodities market is a awful mess. 

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