Thursday, January 7, 2016

Remember As January Goes, So Goes The Year.........

Stocks tumbled again on Wednesday while oil broke to a new multi-year low.

Dow: 16,906.5, -252.2, (-1.4%)

S&P 500: 1,990.3, -26.5, (-1.3%)

Nasdaq: 4,835.8, -56.7, (-1.2%)

WTI crude oil: $33.97, -5.5%

Early Thursday China Halted Trading For The Entire Day After Another 7% Crash. The Shanghai Composite has lost 11.7% this year. 3 days!

The Chinese yuan fell 0.5% to 6.5646 per dollar, making for its biggest one-day drop since Beijing's August devaluation. Thursday's weakness has the yuan at its weakest level against the dollar since September 2010.

Markets everywhere are under severe pressure as Thursday begins. 

The selling in China is taking its toll on markets around the world. S&P 500 futures are down big. Dow futures are plunging. In Europe, Germany's DAX (-3.6%) leads the decline. Aside from the weakness in China, Hong Kong's Hang Seng (-3.1%) was the worst performer in Asia.

The price of oil is nosediving.

WTI trades at a $32 handle....

After hitting 11-year lows on Wednesday, both UK Brent and US crude prices have tanked to 14-year lows on Thursday.

Brent is down 4.15% at $32.89 at 2.00 a.m. ET and US crude is down 3.84% at $32.66. Both are at levels not seen since 2002 when the oil price was recovering from September 11.

Gold hits $1100.....

Remember, As January Goes, So Goes The Year

January provides an important signaling effect on what to expect for the rest of the year — "As January goes, so goes the year," the old saying holds. 
If so, the first few trading days do not bode well for the rest of the year.

The first month has served as a predictor of the full year 72.4 percent of the time.

The first day of the year hasn't been as good a signal, with just a 50.6 percent record of accuracy.

Another barometer, looks at what stocks do during the first five days of the year and extrapolates that out through the rest of the year. In the last 16 presidential election years, 14 followed the direction of the first five days.

The full-month January performance has had a predictive record in 12 of the last 16 presidential election years.

Another hurdle is the approach of the Q4 earnings season, which will get its unofficial start on Jan. 11 when Alcoa (AA) reports. Things aren't looking good: According to FactSet data, the S&P 500 is on track for its third consecutive quarterly earnings decline, something that hasn't happened since the recession ended.

Earnings are expected to decline 4.7 percent in the quarter. This is a big markdown from the 0.6 percent drop expected at the end of September.

On a technical basis, things are looking ugly as well. The Dow spent November and December trying to retake the 18,000 level last crossed back in July. Now, with 17,000 in play, a quick drop to the August-October lows near 16,000 is looking more and more likely.

Market breadth is weakening as fewer and fewer stocks stand against the tide: Just 52 percent of the S&P 500 stocks are in uptrends, down from a high of 72 percent in November and a high of nearly 85 percent back in the summer of 2014, before the crude oil wipeout slammed the energy sector.

If stocks falter now, the overwhelming weight of market history suggests investors are in for a rough ride through the rest of the year.

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