With continued uncertainty in global markets, today two legends in the business sent King World News fascinating pieces about what surprises to expect as we come to the end of 2015.
“Markets trend only about 15% of the time. The rest of the time they move sideways.”
Paul Tudor Jones
December 22 (King World News) – Jeff Saut, Chief Investment Strategist at Raymond James: Paul Tudor Jones graduated from University of Virginia in Charlottesville, Virginia, a town where I used to hang my hat, in 1976, and went to work for EF Hutton, another place I hung my hat. After a few interim jobs he founded Tudor Investment Corporation in 1980 and went on to become one the best hedge fund managers in the annals of Wall Street. Currently a semi-retired billionaire, he chairs The Everglades Foundation that is trying to preserve Florida’s Everglades.
Known for his savvy investment style and market axioms, I dredged up this one while pondering the stock market’s recent action. To wit, “Markets trend only about 15% of the time. The rest of the time they move sideways.” Yep, that sounds about right because in the first three sessions of last week the D-J Industrials gained about 500 points and then in the last two days of the week gave back some 600 points. Yesterday that sideways action continued for most of the session until a late “buying program” left the senior index up ~123 points.
In point of fact, “sideways” would be a good description for all of 2015 because the S&P 500 closed 2014 at ~2058 and currently changes hands at 2021.15. That’s roughly a year to date loss of 37 points for the S&P 500 for one of the flattest years on record. As noted in yesterday’s missive, however, while the SPX has gone nowhere this year the average stock in the SPX is down 18.6% from its 52-week high!
Just like last week’s early rally and subsequent decline came on no real news, yesterday’s action was equally devoid of news. I must admit I was surprised that there was no downside follow-through yesterday morning after last Thursday/Friday’s Flop because that is typically what you get. Recall it was a week ago Monday, after the previous Friday’s (December 11th) 309-point tumble (a 90% Downside Day), that the Dow opened weak, but then gathered itself together to close up some 103 points. Hopefully, this will not be a replay of last week’s late angst and we have finally commenced the Santa Rally.
Technically, the SPX has rallied off an extremely oversold condition, leaving it back into what is now the overhead resistance zone associated with the November of this year’s lows around 2020 – 2022. Bettering that brings into view the often mentioned 2040 – 2050 level. As for me, I continue to hold out hope for a “rip your face off rally,” although the odds for that have dimmed. This morning, 3Q GDP (1.9%e, Consumption 2.9%e, Price Index 1.3%e, and Core PCE 1.3%e) should help extend yesterday’s rally with the preopening S&P futures better by 3 points at 6:00 a.m.
Also, this was a portion of today’s note from Art Cashin: Increased Volatility As Seen Through Another Pair Of Eyes – The always insightful, Sam Stovall, over at S&P Capital IQ, took a quick look at past volatility when the Fed began hiking rates. Here’s a bit of what he wrote:
The S&P 500’s volatility increased in 2015. What’s more, history says, but does not guarantee, that it will rise even further. In the past 12 months, the S&P 500 has seen daily closing price volatility exceeding 1% 71 times. This count approaches the annual average of 75 since 2000, after starting the year at nearly half that level. In the past 50 years, it has been fairly common to see volatility rise, especially after the start of rate-tightening cycles. Indeed single-day closing price volatility saw an average 77% jump during the three months after the first in a series of rate hikes since 1967.
In the three months prior to the December 16 rate increase, the S&P 500 experienced 21 days of closing price volatility in excess of 1%. History therefore implies that things could get even choppier in the months to come. Yet this increase in daily volatility occurred within a very narrow 52-week high-low price range. At 14%, this differential is 8th lowest since WWII. History shows that those years with narrow high-low ranges recorded the worst next- year price performances and frequencies of advance. In other words, 2016 will likely endure increased volatility, but without much in the way of price appreciation to show for it.
So, it looks we’ll have to keep the “Fasten your seatbelts” on a little longer.
Overnight And Overseas – Equity markets are rather mixed with the majority showing small losses.
In Asia, Shanghai and Hong Kong had small gains, while India and Japan moved lower. In Europe, London was up a bit yet the other markets are all a touch lower.
Crude had inched higher early on, but has now rolled over and is softening. Gold is down about $3 and the euro is firming a bit against the dollar.
Consensus – The Santa Claus Rally is historically due to start on Christmas Eve. Markets are a bit confused as the bulls want to start early and the rollover in the crude contract complicates thinking. We’ll get crude inventory data later in the day, so trading may be cautious in front of that. Stick with the drill – stay wary, alert and very, very nimble.
***Michael Pento’s remarkable KWN audio interview has now been released and you can listen to it by CLICKING HERE OR ON THE IMAGE BELOW.
***ALSO JUST RELEASED: What’s In Store For Gold And Oil In 2016 May Surprise Investors CLICK HERE.