Economic and Technical Analysis 2015 Year End Wrap Up

S&P 500 August 2015 to January 2015 technical analysis torycapital

Stocks didn’t do much last year and it seemed like the big money managers had a hard time with several major hedge taking huge losses.  The S&P 500 rose .22 percent with a high but it was more than flat for most money managers. Oil continued to be a wealth taker and I was clear in my analysis which I followed up with later in the year reaffirming my prediction that oil would continue to go down.  The Dow Jones Industrial Average never came close to 20,000 as Dr. Seigel suggested and I predicted wouldn’t happen.

In a non-trending market – it pays to trade less and keep cash ready.  Buying on the dips became harder to justify after the sharp crash in August – which I predicted. I told friends on Facebook to watch out for a crash the day before the big drop to take credit for predicting it before anyone else- and I was right. The next trading day was the “August 2015 Flash Crash”.

Although stocks rebounded sharply, we ended the year flat and have begun the year right around the August low which many thought would NOT be retested.  The market appears directionless but a quarterly overview shows the S&P 500 is looking to break support and the current levels are key pivot points.

Stay tuned for my 2016 predictions, but in short I don’t see this year being much better than last year as the BRIC leveraging phenomenon continues to unravel and the economic data weakens globally.  The Fed needs to leave the door open to reverse course, even if they don’t – the window for raising rates had long since passed and it may be important for market participants to believe Yellen and company will be flexible rather than risk having Japan style growth for the next decade.  Some argue this may have already started because this is an extremely weak recovery characterized by bickering in Washington for the last 8 years.

If the data continues to show the U.S. Economy is weak and then the FED moves, it will invariably be too late. It may be time as I’ve suggested in the past to get rid of the terminology “data dependent” and start using better economic models to predict.

For example, Chinese economic data has been horrible for 3 years now and it’s been clear based on commodity prices that China was undergoing an economic contraction.  The numbers coming out of the region could not be trusted.

The Fed recently decided not to raise interest rates due to uncertainty in China which at the time some found slightly unusual.  Has China gotten any better?  And has the U.S. economy (which could be on the beginning of a double-dip recession…)?

I will be writing periodically at key levels I identify as important. I’m working closely with a couple of startups and can’t update my technical analysis too often.  In essence if you did nothing last year after my last post but sell or stay in cash- you are considerably better off.

The chart above shows a breakdown in early December when the 50 day moving average crossed back over the 200 day moving average which traders watch carefully but there was no follow through.  Other indicators I watch carefully showed a continuing decrease in appetites for equities during a seasonal period where rallies tend to occur in expansionary cycles.  My social media indicators confirmed this.

The market is currently at a level that may entice some new buying in the short-run and this may be an opportunity for buying on the dip, however, global sentiment is overwhelmingly negative which may call for allowing the dust to settle. Keeping cash as I suggested in August before the flash crash may be the best solution for preserving capital in this current volatile market with top companies like Apple taking a whopping of a loss in share price over the last 5 trading sessions.  I will revisit last year’s predictions and make new forecasts for 2016 in the next update.

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