Market Off To Its Worst Start Since ‘09

Rick_PendergraftJanuary 15 marked the end of the first 10 days of trading in 2015 and to say it has been a little shaky for the stock market would be putting it mildly. The S&P lost 3.18% in those first 10 days and that is the worst start to a new year since 2009 as the market was at the tail-end of the bear market that gripped most of the world markets.

If we look at the ten main sectors as defined by Standard & Poors, we see that the defensive sectors of Utilities, Healthcare and Consumer Staples were the only three sectors that were able to turn in a positive performance in those first two weeks. The Energy sector was the biggest laggard in 2014 and that hasn’t changed so far in 2015.

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It is a little surprising to see the financial sector getting off to such a rough start as it was among the top five performing sectors last year and in the last six months as well. Of course last week was a big one for earnings reports in the financial sector and that obviously had an impact on the sector’s performance.

With earnings season starting to heat up this week and with the global currency markets as volatile as they are, it could be a rough January. There are some that believe that as January goes, so goes the year for the stock market. This is sometimes called the January barometer or the January Effect and from 1950 through the mid-80s, it was a rather reliable predictor. In the last 30 years or so, it has become less reliable as a predictor for the year.

That being said, January is historically one of the best performing months for the overall stock market, so getting off to such a rough start this year is a bit of an anomaly. Of course the market has been in one of the greatest bullish runs in history since the market bottomed in the spring of 2009.

Given how overbought the market has been and how each little pullback has been greeted with a round of buying, it could just be that the market was due for a pullback. I like to look at two particular moving averages on the weekly chart of the S&P, the 13-week moving average and the 52-week. This shows how the index has done over the past quarter versus how it has done over the last year. The index has not closed a week below its 52-week moving average since November 2012 and it has only been close one time since and that was the pullback last fall.

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As long as the 13-week remains above the 52-week moving average, I will remain bullish for the long-term. If the 13-week moving average crosses bearishly below the 52-week, I will change my long-term posture on the market to bearish.

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Comments List

  1. Dixie Stancil

    Market goes back and forth in the beginning of a new year.
    Will be interesting to watch and see how it goes.

    Reply

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