Daily Market Update -January 4, 2015 (Close)
They say that the first week of the New Year determines the first month and that the first month determines the outcome for the who year.
Hopefully that’s not going to be the case.
No one really expected to wake up on the first Monday of the New Year to news than Iran and Saudi Arabia were at each other’s throats even more.
If this was 2015, we might have expected that any rise in the price of oil coming from the uncertainty associated with conflict in that region, would have resulted in the US stock market moving higher.
But late last week it seemed as if some normalcy was beginning to return to that relationship and so this morning markets aren’t going up in response.
Maybe, though, they’re just not going down as low as they might ordinarily have done, given what happened overnight in the Shanghai market.
With that market down 7% on halted trading, the contagion spread to Europe this morning.
If our own futures market had followed Germany, instead of looking at a loss of 300 points, we would be about double that amount.
Germany itself was only down about 60% of what transpired in Shanghai, so maybe it is that oil spike that’s giving us some cushion as we got set to begin the day.
That seemed to work for a while, until oil inexplicably reversed course and the market went down more and more, although it did recover significantly from its nadir.
Considering that some of our own weaknesses in 2015 were related to earlier sharp declines in Shanghai, there may be very good reason for concern as the year gets underway.
With a little bit of cash and a few positions expiring this week, I wasn’t too anxious to go and chase the market in what could have been a bargain hunter’s delight.
I thought that I would much rather sit back and see if there was any truth to the contention that the year after a flat year is typically a good year.
You wouldn’t know that by the competing contention about the role of the first week of the year and the outcome of the rest of the year.
As the day does progressed, I was prepared to part with some money if there appeared to be some stability, and I surprised myself by doing so before the stability appeared, but I wasn’t reaching to deeply down the well for that money. I think that I was still be inclined to sit back and watch.
While in 2015 there were a number of days that large early losses were reversed during the course of the day, that’s not a typical pattern and very often a period of stability is followed by a second leg lower, so I wasn’t overly interested in testing the waters too much.
I’d rather not get caught in the second leg.
That wouldn’t be the most auspicious way to begin 2016.
While it may be a difficult first day and maybe a difficult first week, my eyes are going to be focused also on a fairly large number of positions that are set to expire next week as the January 2016 cycle comes to an end.
That coincides with the start of earnings season, so there may be lots of things to be thinking about as we try to sort out the international issues.