Craig Johnson’s

Stock Market Summary

Monday, January 25, 2016

  • A tough start to the New Year made it the worst two-week start for a new year in stock market history. Last week the fear level surged, with stocks dropping sharply lower on Wednesday.  It appeared that the decline was going to extend into a third week, but a market reversal late in the day halved the decline by the close. This was followed by an up day on Thursday and an even more powerful rally on Friday, putting the stock market back on its feet.
  •  The major market indices recorded gains for the week. In addition, the sharp trend lower in January was broken on Thursday making any future pullbacks much more likely to be at higher lows.
  • The large drop sent the major indices down to what is referred to as the “Ebola lows” in November 2014 (aptly named, as that was the reason given at the time for the large decline then) and finally bouncing just below that level to the February 2014 pullback low. On the New York Stock Exchange, due to the severe selling earlier in the day on Wednesday, only 2 stocks recorded new 52 week highs, while 1218 recorded new 52 week lows. From the November 3 high to Wednesday’s low the S&P 500 dropped 14.4% making this pullback the third largest pullback since the March 2009 low.
  • After dropping below $28 a barrel earlier in the week, oil prices rallied nearly 17% to over $32 a barrel by Friday.
  • The bounce in oil prices seemed to be the driver or catalyst that the stock market needed. It seems as consumers are enjoying lower gasoline and heating prices the ramifications for not just the energy industry, but also other indirect industries such as the financial industry are quite negative. Somewhere in the future the price of oil and the stock market will decouple, but for now they seem to be in lockstep.
  •  Earnings season is making its presence known with many companies reporting their fourth quarter and annual revenue and income reports. This week and next are the two weeks with the greatest number of companies reporting.
  •  The stock market’s decline, with the brunt of it coming in a short period of time, has caused a lot of technical damage to the charts of most stocks and indices. This makes a cautious approach for the short term necessary. The short-term trend is negative, the intermediate term is neutral and the long term trend remains higher. If the market is successful in building a trend of higher highs and higher lows in the coming months, this correction will likely be forgotten. 

Sources: bankrate.com, bloomberg.com, briefing.com, Dow Jones News, Financial Times, finviz.com, Investor's Business Daily, marketwatch.com, seekingalpha.com, Thomson Reuters/First Call, U.S. Dept of Treasury, yahoo.com and individual company web sites and press releases.

Leonetti & Associates, LLC views or opinions are as of a certain date and subject to change without notice.  The material contained herein is for informational purposes only and obtained from sources we consider reliable. We make no guarantee as to its accuracy or completeness.  References to specific securities and industries/sectors should not be considered recommendations to buy or sell any security or advisory service.  Past performance is not a guarantee of future results.

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