I've commented a few times lately that we often see bouts of selling in the last couple of days of the year. Some folks make sales for tax reasons while others just like the idea of starting the new year with a high level of cash. There are a number of motivations for last-minute selling, and we saw it kick in today.
Trading was already painful thin so the selling pressure made it feel particularly gloomy. Breadth was 2-to-1 red and momentum stocks did even worse. The only FATMAN stock to finish in the green was Tesla (TSLA).
On the small-cap screens there were a few movers such as Weight Watchers International (WTW), Universal Display Corp. (OLED), Vuzix Corp. (VUZI) and NantKwest (NK), but it is quite limited compared to what we often see around holidays. We should have a few movers tomorrow, but you really have to be careful with selection and manage trades tightly.
One of the issues today is that so many of the predictions about what lies ahead are quite negative. Traders that have been trying for last-minute gains aren't inclined to hang around. The plan for many was to go for short-term gains during a Santa Claus rally, then move back into cash quickly. The fact that technical patterns are poor isn't very helpful. We are turning back right at resistance levels and there is little good underlying support.
It is going to be a tough day of trading tomorrow and many aren't even going to bother. We'll see if anything interesting develops but it may better just to start the new year celebration a bit early.
Have a good evening. I'll see you tomorrow.
Dec. 30, 2015 | 1:38 PM EST
Right This Way to the Sidelines, Folks
- Quick flips aren't materializing in the market.
Interest in trying to catch some quick trades to end the year is coming to an end and we are seeing a slow drip lower as a result. Breadth has deteriorated to about 1850 gainers to 3850 decliners. Breadth on my momentum screens looks even weaker.
Trading at this time of the year is largely a function of jumping in at the first signs of some upside momentum and then flipping when things cool off and we turn back down. With the indices hitting intraday lows as I write, many traders are closing out positions and moving to the sidelines.
I was hoping for more pockets of speculative action among the small-caps, but it is quite limited. The big winner today is Weight Watchers (WTW) as Oprah Winfrey commercials begin to run. There is a smattering of other things like Vuzix (VUZI), American Superconductor (AMSC), Cadiz (CDZI) and iPath Pure Beta Crude Oil ETN (OLEM), but it is extremely limited.
My game plan is to keep looking to see if there is anything I can grab for a quick flip, but it is going to be tough as volume continues to slow. We should have some last-minute volatility tomorrow, but at the moment it looks like traders are more interested in closing out the year and starting 2016 with plenty of cash.
Dec. 30, 2015 | 10:41 AM ET
As 2015 Winds Down, So Does the Market
- · This weak action is going to drive some to close up shop and call it a year.
Volume and participation are slowing as market players look to wrap up the year. We had a nice day of mark-ups Tuesday with the big-cap FATMAN stocks (FB, AMZN, TSLA, MSFT, GOOG, NFLX) taking the lead, but now there are signs that folks are ready to book what gains they have left and start the new year with plenty of cash on the books.
There isn't any big rush for the exits, but breadth is running not quite 2-to-1 negative and the FATMAN names are notably weaker, although Tesla (TSLA) is showing a little relative strength.
As I mentioned in Columnist Conversations, I'm worried that there is so much concern about a weak start to 2016 that many will be looking to sell into strength to conclude this year. Technically, the indices are not in very good shape and seasonality turns down quickly after the first few days of January.
I've been a heavy net seller today and I see nothing new that I'm tempted to buy. I'll be eyeing some small-caps in January, but right now it looks like many are still being pressured by tax-loss selling. The January effect, which is a bounce in stocks beaten down by tax selling, may actually occur.
This poor action is going to drive some to close up shop and call it a year. A little extra caution is warranted.
Dec. 30, 2015 | 6:57 AM EST
Doom and Gloom Predictions for 2016 Pile Up
- But it's very likely that the pessimism is exaggerated.
"...Global growth will be disappointing and uneven in 2016."
-- Christine Lagarde, Managing Director, International Monetary Fund.
There isn't much going on, as far as economic or company news, so the market is mostly reacting to oil. Crude is down about 2.5% on a surprise increase in inventories. There has been some talk about a possible bottom in oil, but the bottom fishers are losing confidence again.
We have some housing data coming up later, but the action today will mostly just be a continuation of end-of-the-year positioning and some last-minute efforts to produce some returns. We saw some pretty standard holiday trading yesterday as the key big-cap names, like Growth Seeker portfolio holding Amazon.com (AMZN), as well as Action Alerts PLUS portfolio names Alphabet (GOOGL) and Facebook (FB), led us higher, but volume was obviously light and small caps were a bit mixed.
One thing that is quite notable this week is how pessimistic forecasts are for the year ahead. This is the week when the news media inundate us with predictions from just about everyone with even a remote connection to the markets. The big brokerage firms tend to have their standard guess about some reasonable upside for the year, but there are more folks than I can ever recall predicting that we are going to have a very poor year.
IMF Managing Direction Christine Lagarde joins the fray with comments about how global economic growth will disappoint next year as the slowdown in China and raising rates in the U.S. take hold. The comments were very downbeat and are helping to suppress the holiday mood once again.
With expectations of a lousy first quarter for the market so high, there is higher risk than usual of some selling to conclude the year. We often see a last-minute bout of selling as some money managers elect to dump positions and start the new year mostly in cash. It can be quite refreshing to clear the decks and start off with a clean slate, and many will look to do that, especially when we have a rally to sell into.
As for all the predictions of doom and gloom in 2016, I see little reason to worry about it at this point. My view is that the market will have its ups and downs and if we stay vigilant we can navigate and extract profits along the way. It may be easier to make money in positive markets, but there will be good opportunities even if we have a down year. I'm confident we can make money if we stay disciplined and grind it out day after day.
Futures have bounced back from some of the early pressure, but it is going to be a tricky day. I'll be looking for some speculative small-cap action, but timeframes will be quite short.