The market struggled on Wednesday ahead of the Federal Open Market Committee (FOMC)’s latest policy statement, and the major indices ended the day by closing near their session lows. The zombies were slightly dovish in their update, but they left interest rates unchanged while saying that they are watching global market developments. They maintained their upbeat view of the U.S. economy, but it failed to attract buyers to the market.
The market had its first winning week for 2016 following a strong Friday finish. Two-straight winning sessions hardly make a trend, and it’s a little too soon to a say a “V-shaped” recovery is in store. However, the near-term outlook appears promising as a number of technical indicators I follow turned bullish.
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The market suffered its worst trading day in months on Wednesday, as volatility soared to fresh highs and the August lows came back into play. However, the bulls recovered nicely from the mid-day madness, and the small-caps rebounded to regain positive territory by closing bell.
It felt like a Paul Simon week for the bulls as they struggled with resistance before totally collapsing to fresh 2016 lows on Friday. The August 2015 lows are now in play, and the bears will be looking for weak corporate earnings to keep their momentum.
Wednesday’s opening rally felt suspicious, and the first 30 minutes of trading action confirmed that feeling, as the market gave back all of its gains and then some. The freefall to lower lows was a bearish sign and, to make matters worse for the bulls, volatility spiked into the closing bell.
For the past several years the Portfolio has mainly been bullish. At times, I have added bearish positions and this will likely be the year I return to this strategy in a much bigger way. Shorting stocks is like owning a stock long, except you want shares to go lower. You will have to have funds in your brokerage account to do these type of transactions but don’t let this deter you from making money in what could be a nasty 2016.
The market pulled back on Wednesday, as the major indices stayed underwater throughout the session. The damage was minimal, but volatility has heightened heading into the final trading day of 2015.
The Monday/Friday closes continue to be mixed, and this often is the case during trading ranges. The Dow closed lower last Monday to snap a two-win streak, but it has closed lower on four of the past six Mondays. This is a slightly bearish sign.
