Last week was the third straight down week. Five straight down days before yesterday’s rally. Ugly.
The late strong rally was encouraging. But all the major indexes remain beneath their 50-day moving averages, and it takes more than one day to indicate an upside reversal.
And although the intraday volatility, downside reversals, and triple-digit daily plunges, have been nerve-wracking, as of Thursday’s close the pullback had only amounted to 4.7% for the S&P 500. So it could well have further to go on the downside and still only be another minor short-term pullback.
Yet it was an encouraging way to end the week.
The Dow was up 1.1%. For our subscribers the day was more positive, with all our holdings beating the Dow, with gains of 1.3%, 1.3%, 1.4%, 1.6%, 1.9%, and 3.2%, and still holding 20% in cash with our eye on a couple of other promising areas.
We need more of the same, and should get it if and when the pullback ends. There are encouraging signs.
I said in my newspaper column last weekend that The ECB Will Be a Big Factor in 2015′s First Half
And there were increasing signs this week that the ECB is preparing a substantial QE stimulus package that will be announced at its January 22 meeting this week.
Major European markets, closer to the situation than we are in the U.S., seem to believe it, with their strong bounce-back rallies this week, in spite of the turmoil in currency markets created by Switzerland’s surprise lifting of the cap on its currency, and the resulting 13% plunge in its stock market.
This week will be important.
This week will be important in defining whether this is just another short-term pullback, whether it may have already ended, or whether it is possibly the beginning of something more serious.
We’ll find out more about the fallout from the Swiss shock to currency markets.
This week will also bring the answer as to whether the ECB will launch a QE stimulus package for the 18-nation Eurozone, and if so how large it will be, and how markets will react to it.
We will see whether the pause in the oil price plunge this week was just a pause, or perhaps a sign of a bottom.
And 4th quarter earnings reports will continue. Reports this week from the major banks were disappointing.
For us, we will simply continue to follow our intermediate-term indicators on the U.S. and global stock markets, bonds, and gold.
The Fiscal Times, Anthony Mirhaydari: ‘The Bond Market is Warning Of Huge Trouble Ahead’. Something odd is happening in the government bond market. Interest rates are pricing in a debt-deflation cataclysm. How else can you explain that the U.S. 30-year bond yield hit a record low of 2.4% Wednesday. Or that Japanese and German 10-year yields are plumbing record lows? Or that five-year yields of bonds issued by Eurozone safe havens Finland, Germany and Switzerland are in outright negative territory? Something is very wrong here.”
Barron’s, Shuli Ren: Oil Prices May be Bottoming. The International Energy Agency today (Jan. 16) lowered its 2015 forecast for non-OPEC productions and said that the “tide will turn.” HSBC also had a report out today saying “we are seeing leading indicators of weak prices starting to drive the market rebalancing that OPEC is seeking to achieve.” Fingers crossed and let’s hope the worst is over.”
To read my latest newspaper column click here: Gold Rally Has Technical And Fundamental Support
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Sy Harding publishes the financial website Street Smart Report Online and a free daily Internet blog at Sy’s Free Blog. In 1999 he authored Riding The Bear – How To Prosper In the Coming Bear Market. His latest book is Beat the Market the Easy Way! – Proven Seasonal Strategies Double Market’s Performance!
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