Thursday, January 07, 2016
Continuing to fall and picking up speed as the Dow dropped 392 points on extremely heavy volume. The advance/declines were 7 to 1 negative. The summation index is heading down. Oversold and staying there. How much further can this go? The recent lows are at around 1880 for the S&P 500. That would be a good place to start to look for some support. This is beginning to look like a repeat of the markets drop back in August caused by the Chinese yuan manipulation. Same thing here. It's too late to get short but there will be quite a bounce at some point. I don't know when that point might be. Employment data due tomorrow and I suppose anything goes with the market reaction to that. We'll have to get through tonight first. GE got clobbered and fell 1 1/4 on very heavy volume. Getting oversold here in a hurry. I might have to try the February calls here next week. However the next support is at $27 with the 200 day moving average and we are still a couple points away from that. It's something to consider. Gold found buyers on the fear factor. The futures here rose about another $15. Back above $1100 but not a lot of noise about it. I'd expect gold to lose steam once the markets settle down. The US dollar lost a point today as well to support the rise in gold. The XAU added 1 2/3, while GDX gained 2/3. Volume perked up. I myself would have to see a lot more gains before I believe that gold has turned around. Mentally I'm feeling OK. The TRAN is still weak and the small stocks are getting pummeled. Quite a bearish beginning to the new year. The Chinese stock market is in free fall and trading has been halted a couple times in the past few days. That is a problem. I thought maybe we would see some kind of bounce here because some of the short term indicators are at extremes. That is dangerous but it is where we are. Even if we get a bounce I'm not sure how long it would last. There are no buyers at the moment. So we'll see. Caution is still advised and the sidelines are a safe place as always. Of course you don't make any gains there but you don't lose anything either. We'll brace ourselves for what comes out of China overnight and see how the market reacts to the employment data tomorrow.