Below is a visual summary of what has transpired since the Fed raised interest rates, followed by my comments:
To recap:
The Fed raised interest rates in December for the first time in seven years, by a token .25%, so they could pretend to be normalizing policy. Profit and GDP estimates have trended lower every day since then, with JP Morgan just now lowering their 4th quarter GDP estimate to .1%. In other words, the economy is in stall mode.
Factset 4th Quarter aggregate earnings estimate -5.7%:
"For Q4 2015, the blended earnings decline is -5.7%...the first time the index has seen three consecutive quarters of year-over year declines in earnings since Q1 2009 through Q3 2009. On December 31, 2015 the estimated earnings decline for Q4 2015 was -4.9%...Seven sectors have lower expected earnings growth rates today compared to September 30 (due to downward revisions to earnings estimates), led by the Energy sector. On September 30, the estimated earnings decline for the Energy sector for Q1 2016 was -17.7%. Today, it stands at -56.1%. However, it is interesting to note that analysts in aggregate do expect earnings growth to return for the remaining quarters of 2016"
Wall Street bid up the most over-owned, over-valued stocks into year end, to keep the indices from collapsing prior to bonus payout. The instant 2016 struck, the S&P indices fell -11% amid a widely heeded call on Wall Street to sell every rally. There have been three short-covering rallies during the past two weeks - each of shorter duration. ALL stock sectors have rolled over, with last year's "winners" getting hardest hit. The market has no leadership.
Almost every risk asset on the planet hit a new 52-week low this week. In some cases, e.g. oil, multi-decade lows. Implied options volatility was the highest level since the day before the August Flash Crash.
Meanwhile, the Chinese government, which has been weakening its currency steadily for six months informed speculators that a weaker Yuan was not a one-way bet. Of course they can't actually raise the Yuan, so they just held the currency steady for four days and then allowed it to resume the downtrend. Chinese stocks re-entered bear market, following a meager multi-month bounce. Japan Yen is in full fledged risk-off mode, monkey-hammering every risk asset on the planet. Usually overnight.
Serial bottom callers in oil were obliterated this week as Brent hit $29 with WTI trading at the same level. Onshore/offshore storage is maxed out and Iran is coming online. The capitulation phase is only just beginning.
For their part, the lamestream media viewed every piece of information in total isolation, for maximum plausible deniability. Connecting the dots is not allowed as it may impact subscription revenue. President empty shirt, informed us on Tuesday that his fake recovery is not fake, his only regret is that it left 99% of Americans behind. He got a standing ovation from the assembled Idiocracy. You can't make this shit up.
The Global Financial system ended the week at its most perilous juncture ever.
Once again, gun stocks top ticked a key turn for the stock market and hence Social Mood. Apparently people bought what they needed for a bear market...
